Case Study 1

Data

Steve and Mary Jo, both 35 years old, own a house worth $150,000 and have a yearly income of $50,000, monetary assets of $5,000, two cars worth $20,000, and furniture worth $10,000. The house has a $100,000 mortgage, they have college loans of $10,000 outstanding, and the cars have outstanding loans of $10,000 each. Bills totaling $1,150 for this month have not been paid ($1,000 is to pay off their credit card that they use for bills).

• Using the data above, create a balance sheet to calculate Steve and Mary Jo's net worth. How are they doing?

(20marks)

Question 6

Case Study 2

Data

Steve and Mary Jo, who make $50,000 per year, calculated their average tax rate at 15 percent. They contribute 12 percent of their income to charity and pay themselves 10 percent of their income. They have 25 years and $100,000 remaining on their 6-percent mortgage ($7,730 per year), three years and $20,000 remaining on their 7-percent auto loan ($7,410), and 10 years and $10,000 remaining on their 3-percent college loan ($1,160). In addition, utilities and property taxes were $2,270 per year, food was $6,000, insurance was $1,500, and other expenses were $5,430.

• Calculate their income statement using the "better" method, and round values to the nearest $10. How are they doing?

(20marks)

Question 7

Case Study 3

Data

Steve and Mary Jo would like you to help them understand where they are financially. You have Steve and Mary Jo's balance sheet and income statements, which were prepared earlier. Calculate each of the six key liquidity, debt, and savings ratios. Using the data and calculations, comment on how well they are doing. What can and should they be doing to improve?