Question

Assume the following annual financial information for Kelli (age 30):

Answer 1

Answer:

Check the explanation

Explanation:

The ratio of Kelli's emergency fund  is not adequate. Emergency fund ratio reveals the overall non-discretionary expenses for 3-6 months to be kept aside from the gross earnings. Kelly's non-discretionary income every month is $34,800 (rent + student loan + car payment + auto insurance + credit card outstanding). Her savings are $2,500. Which is not adequate. It should be, in this case, minimum of 3 times ($34,800)

Housing ratio 1, 2 are adequate

Expenses that are towards rent from gross/net income is 22% which is below the ideal benchmark of 28%, 36% for Housing Ratio 1 and 2 respectively.

Current ratio is less than 1

Cash and cash equivalent savings/(short-term liabilities)

ratio = 0.15 [i.e; 2500/(6600+2400+6000+1200)]

Sarah is likely on target her investment assets shown as below table, calculated values

Name Age Earns Invested ratio remarks                 ideal

Jerry 55 120,000 450,000 3.75        slightly less           4

Liam 25 45,000 5,500 0.12        less than required   1.5

Sarah 35 90,000 325,000 3.61        adequate                 3

Alex          45 110,000 170,000 1.55        less than required    2

With regards to Jay, Maria option (c) is true. i.e; Relative to the rest of their assets, cash and cash equivalents are too low for their age group. Ideally 10%-15% is the emergency fund to be kept for age group 30 years. Attached is the excel sheet for pie-chart and workings.

Answer 2

Answer:

1. b. Kelli's emergency fund is adequate

2. c. Sarah age 35 earns $90,000 a year and has invested assets of $325,000

3.b. "Given your assets and liabilities, your net worth is appropriate for your age group.

Explanation:

Base on the scenario been described in the question,Investment assets make up 34% of your asset pie chart, which is a good level for someone in their 30s (Benchmark:0-30%). Net worth is $300,000 or 46.5%, which is appropriate given the Handberger’s ages (Benchmark: 8-50%). Cash and cash equivalents make up 11.6% of assets (Benchmark: 5-20%). Long-term liabilities make up 46.5%, an adequate level