Question
1-Interest rates are affected by the supply and demand for money, along with the risk of lending and borrowing money. 2-A persons net worth is
1-Interest rates are affected by the supply and demand for money, along with the risk of lending and borrowing money. 2-A persons net worth is the amount left when liabilities are subtracted from assets. If a person has total assets of $1000,000 and total liabilities of $750,000 their net worth is $250,000. ($1000,000 - $750,000 = $250,000). A personal balance sheet will show a persons personal net worth. The balance sheet is a snapshot in time of a persons financial circumstances. It lists the total assets and total liabilities of that person and by subtracting the liabilities form the assets, you have the net worth of that person. 3-When a person is insolvent, they are unable to pay their debts as they become due in the usual course of business. This is usually caused by having debt in excess of their ability to pay or having liabilities that are more than the reasonable market value of their assets. A person can have a steady income and still be insolvent especially if they have a substantial amount in non-liquid assets. The cash flow statement will show whether or not a person is solvent. If the cash flow statement shows a surplus after all liabilities are paid from the total income, then the person is solvent, however, if the cash flow statement shows a deficit, then the person is insolvent. By maintaining a personal balance sheet and a personal cash flow statement on a regular basis will provide an ongoing record of income and expenses and guide a person towards perpetual solvency. Moving forward, can you please explain the following: 1- What is the difference between a fixed expense and a variable expense? Can you provide examples using your own monthly expense? 2- What is the difference between current and long term liabilities?
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