Question

answer questions 2 -5

PPUUOHUMCU LAULISU Answer the following questions via Microsoft Word: 2. Solvency Ratio Total Net Worth divided by Total Assets Solvency ratio measures how much cushion you have before insolvency If you move from a Solvency ratio of 40 to a ratio of 30, Good or Bad? Explain your answer. 3. Liquidity Ratio Total Liquid Assets divided by Total Current debt liabilities) Liquid assets include Cash, Savings Accounts, Money Market accounts, and Certificates of deposit. Liquidity ratio shows how long you could continue to pay current debts with existing liquid assets If you liquidity ratio moves from 15 to 30, Good or Bad? Explain your answer. 4. Savings ratio Relates cash surplus from Balance Sheet to net income from the Income Statement. Savings racio = Cash surplus divided by Net Income If Savings ratio moves from 15 to 20, Good or Bad? Explain your answer. 5.Debt Service Ratio provides a measure of the ability to pay debts promptly. Debt Service ratio = Total monthly loan payments divided by monthly gross income If Debt Service ratio moves from 15 to 30, Good or Bad? Explain your answer. 6. Read the attached article and Solve Problem # 1 for Brendan Frazier HW 2 - Financial Planning Material for Two Case Problems.pdf A

Answer 1

IF ANY QUERY, FEEL FREE TO ASK Solution Solvency Ratio: - It is bad if you move from solvency ratio of 40 to 30, as it means the cushion before insolvency is recuced, and effective steps must be taken to improve/increase solvency ratio. Liquidity Ratio: - It is good if you move from liquidity ratio of 15 to 30, as enhance our ability to pay current debts with liquid assets Saving Ratio: - It is good if you move from saving ratio of 15 to 20, as it indicate good financial health of the company. 5 Debt Service Ratio: - It is good if you move from Debt service ratio of 15 to 30, as it indicate better ability of the entity to repay its debt promptly.