Renée is a 28-year-old occupational therapist living in the
Annex district of Toronto. She recently graduated from the
University of Toronto and now works as an independent contractor
assessing the legitimacy of claims made by car accident victims.
Like many students, Renée accumulated a large student debt during
her years at university and plans to pay it off within the next
five years.
Cash Flow Statement For the Year Just Ended | ||||||
Income | ||||||
Professional billings | $ | 61,005 | ||||
Less: Professional expenses and taxes | (25,290 | ) | ||||
Professional income net of expenses and taxes | $ | 35,715 | ||||
Dividends (after taxes) | 270 | |||||
Total Income | $ | 35,985 | ||||
Fixed Expenses | ||||||
Rent | 11,000 | |||||
Student loan payments | 4,300 | |||||
Total Fixed Expenses | $ | 15,300 | ||||
Variable Expenses | ||||||
Utilities, personal, food, clothing, and dental | $ | 14,185 | ||||
Moving expenses | 365 | |||||
Credit card interest | 1,150 | |||||
Recreation/entertainment | 2,030 | |||||
Vacations | 6,340 | |||||
Total Variable Expenses | $ | 24,070 | ||||
Total Expenses | $ | 39,370 | ||||
Surplus/(Deficit) | ($ | 3,385 | ) | |||
Personal Balance Sheet as of Today | |||
Assets | |||
Liquid Assets | |||
Bank account | $ | 1,680 | |
Personal Possessions | $ | 11,680 | |
Investment Assets | |||
BCE Shares | $ | 4,425 | |
Total Assets | $ | 17,785 | |
Liabilities | |||
Current Liabilities | |||
Credit card balances | $ | 9,255 | |
Long-Term Liabilities | |||
Student loan | 21,980 | ||
Total Liabilities | $ | 31,235 | |
Net Worth | ($ | 13,450 | ) |
Using Renée’s financial statements, compute the following ratios:
(Do not round intermediate calculations. Round your final
answers to 2 decimal places.)
Debt to Asset ratio | ||
Current ratio | ||
Liquidity ratio | months | |
(a)-Debt to Asset ratio
Debt to Asset ratio = Total Liabilities / Total Assets
= $31,235 / $17,785
= 1.76
(b)-Current ratio
Current ratio = Total current assets / Total current liabilities
= Bank account / Credit card balances
= $1,680 / $9,255
= 0.18
(c)-Liquidity ratio
Liquidity ratio = Total liquid assets / Expenses per month
= Bank account / [Total expenses / 12 Months]
= $1,680 / [$39,370 / 12 Months]
= $1,680 / $3,280.83 per month
= 0.51 Months
Renée is a 28-year-old occupational therapist living in the Annex district of Toronto. She recently graduated...
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