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Homework answers / question archive / Based on the following data, calculate the ratios requested: Long-term liabilities $854,321 ,Net worth $1,448,000 Liquid assets $55,200 ,Current liabilities $45,650 Credit card repayments $5,540, MPF $12,000 Interest earned on savings $150 Gross income $281,850 Car loan repayment $38,087 ,Property market value $685,483 a
Based on the following data, calculate the ratios requested: Long-term liabilities $854,321 ,Net worth $1,448,000 Liquid assets $55,200 ,Current liabilities $45,650 Credit card repayments $5,540, MPF $12,000 Interest earned on savings $150 Gross income $281,850 Car loan repayment $38,087 ,Property market value $685,483 a. find Debt ratio b. find Debit-payment ratio
(a) The Debt ratio can be calculated by the following formula :-
Debt ratio = Liabilities / Net Worth
Here, given in the question :-
Liabilities = $854,321
Net Worth = $1,448,000
Therefore, Debt ratio = $854,321 / $1,448,000 = 0.59
(b) The Debt-payment ratio can be calculated by the following formula :-
Debt-payment ratio = Monthly Credit Payment / Take-home pay
Here, given in the question :-
Credit card repayments = $5,540
Car loan repayment = $38,087
Thus, Monthly Credit Payment = ($5,540 + $38,087) = $43,627
Gross income = $281,850
Interest earned on savings = $150
MPF = $12,000
Take-home pay = ($281,850 + $150 - $12,000) = $270,000
Therefore, Debt-payment ratio = $43,627 / $270,000 = 0.16
