Fred (age 44) and Wilma (42) are married and have one child, age 7. Their annual salaries are $62,500 (for Fred) and $51,250 (for Wilma). Both contribute to 401(k) account and their employer matches $0.40 for each dollar contributed upto 3% of their salaries. Additional financial data is provided below. You are required to comment on their financial positions and make some recommendations based on the following calculations and analysis:

i) Develop the Balance Sheet (in $ and common size) as of 12/31/2015.

(ii) Develop Income Statement (in $ and common size) for the year 2014-2015.

(iii) Compute the following set of financial ratios: (i) liquidity (ii) debt (iii) financial security and (iv) performance (iv) Analyze the financial statements and ratios and provide your comments on the financial strengths and weaknesses.

(v) Provide your recommendations and calculate the revised relevant ratios.

Financial data of the household:

Balance Sheet Items (as of 12/31/2015)

Checking Account Balance $3,000

Savings Account Balance $3,750

401 (k) Balance - Wilma $52,500

401 (k) Balance - Fred $57,250

529 Plan Balance $2,500

House Value $215,000

Automobile Value - Wilma $19,500

Automobile Value - Fred $17,500

Jewelry Value $2,500

Furniture Value $7,250

Credit Cards Balance $10,900

Next Year's Mortgage Payment due - Principal $23,500

Next Year's Auto Loan Payments - Principal $4,950

Mortgage Balance on House $209,500

Auto Loan Balance $27,500

Balance Sheet Items (as of 12/31/2014)

Investment Assets $105,800

Total Assets $375,800

Net Worth $130,200