Hasan Fareed, a 24-year-old college graduate, never took a personal finance class. He pays his bills on time, has managed to save a little in an investment account, and with the help of an inheritance managed to buy a condominium. Hasan worries about his financial situation. Given the following information:
-
prepare a personal cash flow statement
-
personal balance sheet
-
calculate the current ratio, liquidity ratio, debt-to-assets ratio associated with Hasan’s personal financial statements. Interpret these ratios for Hasan.
In addition to the list of monthly expenses, assets, and liabilities below, Hasan offers this information:
-
All utility bills for the month are unpaid, and therefore appear as a current liability (phone, cable, electricity, natural gas, water/sewer).
-
Auto and mortgage payments have been paid for the month; note that he lists “mortgage outstanding” and “auto loan outstanding” to indicate the outstanding amount remaining to pay off each loan.
-
“Other expenses, monthly” represents cash spent without a record to verify where.
-
Hasan charges everything on his credit cards and pays the balances off monthly. Credit card bills represent his average monthly balance.
-
Semi-annual auto insurance premium payment is due this month.
List of monthly expenses, assets, and liabilities:
|
Visa bill |
$1355 |
Water and sewer bill |
$ 50 |
|
Stocks |
5500 |
Savings account |
3100 |
|
MasterCard bill |
645 |
Chequing account |
1825 |
|
Monthly paycheque, net |
4700 |
Auto insurance, semi-annual |
450 |
|
Mortgage payment, monthly |
1030 |
Residence |
265 000 |
|
Phone bill |
85 |
Food, monthly |
425 |
|
Cable bill |
42 |
Auto |
9000 |
|
Investment account (bank) |
1800 |
Furnishings |
5500 |
|
RRSP |
4500 |
Mortgage outstanding |
202 000 |
|
Car payment, monthly |
435 |
Auto loan outstanding |
4225 |
|
Electricity bill |
60 |
Other personal property |
1800 |
|
Natural gas bill |
70 |
Other expenses, monthly |
350 |
