Question

Whys is the selected answer, right? Please explain how to get to this answer.

10 out of 10 pol Use the following financial information for Jay (age 30) and Maria (age 30) Handberger: - Cash and Cash Equivalents: 575,000. Investment Assets: $220,000. Personal Use Assets: $350,000 . Current Liabilities: $45,000 . Long-Term Liabilities: $300,000 Before your next meeting with the Handbergers, you create a ple chart to visually depict their current balance sheet. Utilizing targeted benchmarks, which of the following statements are you most likely to make during your next meeting? 20s - 305 405 - 50s 60s-70s Cash & Cash Equivalents 5 - 2096 5 - 2096 5 - 2096 Assets Investment Assets 30 - 6096 60 - 7096 0 - 3096 Personal Use Assets 25 -60% 15 - 30% 55-9096 10 - 20% 10 - 20% 0 - 1096 Liabilities Current Liabilities Long-Temin Liabilities 40 - 72% 16-4896 8 - 249 Net Worth Net Worth 8 - 5096 32 - 74% 66-8296 Selected Answer: Answers: a. a. "Given your assets and liabilities, your net worth is appropriate for your age group." "Given your assets and liabilities, your net worth is appropriate for your age group." b. "Your investment assets make up 349 of your asset ple chart, which is too low for your age group." "Relative to the rest of your assets, your cash and cash equivalents are too low for your age group." d. "Compared to your net worth and current liabilities, your long-term liabilities are excessive for your age group." C

Answer 1

	Cash & Cash equivalents	Investment assets	Personal use assets	Total assets	=	Current Liabilties	Long-Term Liabilities	Net worth (balancing value) = Total assets - Current liabilities - Long term liabilities	Total liabilities and net worth
Amount	$                                  75,000	$                   220,000	$                     350,000	$              645,000	=	$                   45,000	$                        300,000	$                                       300,000	$                        645,000
Percentage of holding by Handberger	75000/645000 =	220000/645000 =	350000/645000 =	645000/645000 =		45000/645000 =	30000/645000 =	30000/645000 =	645000/645000 =
12%	34%	54%	100%		7%	47%	47%	100%
Targeted benchmark for 20's-30's (given)	5-20%	0-30%	55-90%			10-20%	40-72%	8-50%

Answer is:
a) "Given your assets and liabilities, your net worth is appropriate for your age group" as the net worth of 47% for Hendberger's is in the target benchmark of 8-50%.

The other options are incorrect for the below reasons:
- Option b is incorrect as the share of 34% in investment assets is greater and not lower than the target of 0-30%
- Option c is incorrect as the cash and cash equivalents of 12% are in the target benchmark of 5-20% and are not low
- Option d is incorrect as the long term liabilities of 47% are in the target range of 40-72% and are not excessive.