Question

Learning Goals:

• Specify SMART financial goals and create personal financial statements, including a balance sheet, income and expense statement, and budget.
• Recognize the impact of taxes on personal finance and be familiar with the structure and elements within the income tax form 1040.

Rodney and Shania Cashman heard that you were taking the PFI/PFP 3301 course at Texas Tech University. Due to their limited knowledge in personal finance they are in a desperate need of your help! They want to know how well they are doing financially and how could they improve their situation.

Based on information they provided to you:
1. Construct their Balance Sheet and their Cash Flow Statement.
2. Calculate their financial well-being through the use of Ratios.
3. Provide any recommendations if necessary.

	Rodney's Salary	$           35,000
	Shania's Salary	$            40,000
	Home value	$          180,000
	Mortgage payment	$            12,000
	2018 Lexus fair market value	$            38,000
	Checking Account balance	$                 900
	Groceries	$              6,000
	Investment Account balance (that holds mutual funds)	$                 500
	2018 Lexus loan payment	$              6,000
	Past Due Utility Bill	$                 200
	Utilities	$              1,200
	Credit Card balance	$              1,000
	Entertainment	$              2,400
	2018 Lexus loan balance	$            25,000
	Stamp Collection	$              1,900
	Gas	$              3,800
	Mortgage balance	$          160,000
	Credit Card payments	$              2,400
	Jewelry	$                 100
	Savings set aside each year towards a new car	$                 600
	Tax Refund	$              1,000
	Money Market Account balance	$              2,000
	401(k) Account balance	$                 500
	Cash	$                 100
	Auto Insurance payments	$                 960

Answer 1

	CASH FLOW TATEMENT
	Cash Inflow:
	Rodney's Salary	$35,000
	Shania's Salary	$40,000
	Tax Refund	$1,000
	TOTAL CASH INFLOW	$76,000
	Cash Outflows:
	Mortgage payment	$12,000
	Groceries	$6,000
	2018 Lexus loan payment	$6,000
	Utilities	$1,200
	Entertainment	$2,400
	Gas	$3,800
	Credit Card payments	$2,400
	Savings set aside each year towards a new car	$600
	Auto Insurance payments	$960
	TOTAL CASH OUTFLOWS	$35,360
	NET CASH FLOW	$40,640
	BALANCE SHEET
	ASSETS:
	Cash
	Cash	$100
	Checking Account balance	$900
	Total Cash	$1,000
	Investments:
	Investment Account balance	$500
	Money Market Account balance	$2,000
	Total Investments	$2,500
	Personal Properties:
	Home value	$180,000
	2018 Lexus fair market value	$38,000
	Jewelry	$100
	Stamp Collection	$1,900
	Total Properties	$220,000
	Retirement:
	401(k) Account balance	$500
	Total Assets	$224,000
	LIABILITIES
	Past Due Utility Bill	$200
	Credit Card balance	$1,000
	2018 Lexus loan balance	$25,000
	Mortgage balance	$160,000
	Total Liabilities	$186,200
	NET WORTH	$37,800
	RATIO:
	Current Ratio (Current Assets/Current Liabilities)	2.916666667	(1000+2500)/(200+1000)
	Debt to Asset ratio	0.83125	(186200/224000)
	Debt Payment to Income ratio	0.272	(12000+6000+2400)/(40000+35000)
	Recommendation: They should Clear their Credit Card dues