Faith Brooks, a 28-year-old college graduate, never took a personal finance class. She pays her bills on time, has managed to save a little in a mutual fund, and (with the help of an inheritance) managed a down payment on a condominium. But Faith worries about her financial situation. Given the following information prepare her personal balance sheet (Worksheet 4) and income statement (Worksheet 5). Using information from these statements, calculate the current ratio, savings ratio, monthly living expenses covered ratio, debt ratio, and long-term debt coverage ratio. Interpret these financial statements and ratios for Faith. Based on your assessment, what advice would you give Faith? In addition to the following list, Faith offers these explanations: All short-term and long-term liabilities are unpaid. "Other expenses, monthly" represents cash spent without a record. She charges all incidentals on her credit cards and pays the balances off monthly. The balances shown here represent her average monthly balances. (Select from the drop-down menu and round to the nearest dollar.) Faith Brooks' Income Statement (yearly) Faith's Take-Home Pay (Select from the drop-down menu and round to the nearest dollar.) Faith Brooks' Income Statement (yearly) Faith's Living Expenses = Choose from any list or enter any number in the input fields and then continue to the next question. Faith's Living Expenses Total Living Expenditures elect from the drop-down menu and round to the nearest dollar.) + + + + + + + Faith's Liabilities or Debt (What She Owes) Current Debt Total Current Debt. . (Select from the drop-down menu and round to the nearest dollar.) Faith Brooks' Personal Balance Sheet Faith's Liabilities or Debt (What She Owes) Long-Term Debt Total Long-Term Debt Faith's Total Debt (Select from the drop-down menu and round to the nearest dollar.) Faith Brooks' Personal Balance Sheet Faith's Net Worth Total Assets Less Total Debt + 868 + = $ 53,926 Faith Brooks' Personal Balance Sheet Faith's Net Worth Total Assets Less: Total Debt Equals: Faith's Net Worth Faith's current ratio is . (Round to two decimal places.) With Faith's available monetary assets, she could meet her current liabilities approximately times, which is good. (Round to two decimal places.) Financial advisors suggest a ratio above , with a trend for the ratio to be increasing. (Round to the nearest integer.) Faith's savings ratio %. (Round to two decimal places.) Faith's months living expense coverage ratio is (Round to two decimal places.) An emergency fund equal to to [ months of expenses is traditionally recommended. Availability of credit to offset committing such a large sum to low earning liquid accounts may reduce the emergency fund. Faith could meet expenses for just over one month - a precarious financial situation that can only be remedied through increased savings. (Round to the nearest integer.) Faith's debt ratio is %. (Round to the nearest integer.) The debt ratio suggests that % of Faith's assets are financed through borrowing. As is typical, her home represents the bulk of her liabilities as well as her scente Over time this ratio is likely to decline: however an increasing trend would be cause for concom (Dound to the nearest integer) Choose from any list or enter any number in the input fields and then continue to the next question. liquid accounts may reduce the emergency fund. Faith could meet expenses for just over one month - a precarious financial situation that can only be remedied through increased savings. (Round to the nearest integer.) Faith's debt ratio is %. (Round to the nearest integer.) The debt ratio suggests that % of Faith's assets are financed through borrowing. As is typical, her home represents the bulk of her liabilities as well as her assets. Over time, this ratio is likely to decline; however, an increasing trend would be cause for concern. (Round to the nearest integer.) (Round to two decimal places.) Faith's long-term debt coverage ratio is The long-term coverage ratio of exceeds the recommended minimum of 2.5, which implies that Faith could meet her mortgage and auto payments, her only long-term debt obligations, times from her current income. (Round to two decimal places.) The reverse of the ratio offers another useful insight on Faith's financial situation. Of every take-home dollar, Faith has committed %, or long-term debt obligations. (Round to the nearest integer.) cents, to service Although her long-term debt ratio is not high enough to raise a caution flag, before taking on additional debt she should seriously consider the impact of having less than % of her take-home pay to meet all other expenses. (Round to the nearest integer.) On first inspection, Faith seems to be financially sound. However, based on a review of the ratios and the information provided, Faith should consider: (Select all the choices that apply.) A. Increasing her savings for an emergency fund and financial goals (e.g., specific goals, retirement, etc.). B. Identifying financial goals and developing a financial plan. C. Improving her recordkeeping. She has omitted budget categories that might typically occur (e.g., recreation) and has a lot of "unaccounted for" spending on her credit cards and with cash. Choose from any list or enter any number in the input fields and then continue to the next question. On first inspection, Faith seems to be financially sound. However, based on a review of the ratios and the information provided, Faith should consider: (Select all the choices that apply.) A. Increasing her savings for an emergency fund and financial goals (e.g., specific goals, retirement, etc.). B. Identifying financial goals and developing a financial plan. C. Improving her recordkeeping. She has omitted budget categories that might typically occur (e.g., recreation) and has a lot of "unaccounted for" spending on her credit cards and with cash. D. Decreasing her spending to increase savings or increasing her income. The latter may not be an option and the impact of the tax "bite" should not be ignored. E. Keeping her liabilities low and not adding more debt without first checking her ratios. Visa bill Stocks $354 $5,500 MasterCard bill $242 Monthly paycheck, net $2,400 Annual medical expenses $264 Mortgage payment, monthly $532 Temple Mutual Fund $2,098 401(k) retirement account $4,498 Car payment, monthly $262 Total monthly utilities $272 Savings account $2,300 Clothing expense, monthly $48 Checking account $824 Account Balance Visa bill $354 Stocks $5,500 MasterCard bill $242 Monthly paycheck, net $2,400 Annual medical expenses $264 Mortgage payment, monthly $532 Temple Mutual Fund $2,098 401(k) retirement account $4,498 Car payment, monthly $262 Total monthly utilities $272 Savings account $2,300 Clothing expense, monthly $48 Checking account $824