Liam and Marta live in London. Both are teachers, with Liam in full time and Martart-time paid employment. When they bought a flat together in June 2018 the mortgage broker talked them through repayment and interest-only mortgages. They decided to use their savings as a deposit and chose a repayment mortgage, which by June 2020 was standing at £100,000. The market value of their flat had increased by 10% over this time period on the original purchasing price of £110,000.
Together, in June 2020 the couple earn a net monthly income of £4000 and their expenditure has averaged £4200 a month over the last two years. In June 2020 their car loan is down from £4,000 to £2,500, their current account balance has dropped to zero and they have an overdraft on their current account of £1500. Meanwhile their savings account holds just £300. They also owe £3000 on a credit card. The rest of their balance sheet has not changed since June 2018.
They are reviewing their finances as they are considering improving their home by installing a new kitchen.
Table 1 shows their balance sheet and financial ratios in June 2018.
Table 1 Liam and Marta’s household balance sheet – June 2018
June 2018 | |
Assets | 113,120 |
Liquid assets | 3,120 |
Cash | 120 |
Current account | 2,000 |
Instant access savings account(s) | 1,000 |
Other liquid assets | 0 |
Other assets | 110,000 |
Home | 110,000 |
Liabilities | 110,000 |
Short-term liabilities | 1,000 |
Overdraft | 0 |
Credit card | 1,000 |
Other short-term liabilities | 0 |
Other liabilities | 109,000 |
Personal loans | 4,000 |
Mortgage | 105,000 |
Ratios | |
Net worth / wealth | 3,120 |
Current asset ratio | 3.12 |
Leverage ratio | 97.24 |
Using the information provided in Table 1, complete the couple’s balance sheet for June 2020.
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