I need help with Qn 1 C..

1(c) Based on the Financial statements constructed above, you are to compute and outline how the gambling debt has impacted Outer Spaces 5 Financial Ratios. Demonstrate and briefly explain its importance in understanding their financial health (Hint: compute and compare financial ratios before and after gambling debts): I. Basic Liquidity Ratio II. Debt Service Ratio III. Liquid Asset to Net Worth Ratio IV. Net investment Asset to Net Worth Ratio V. Debt to Asset Ratio (15 marks)

CASE STUDY VEALTH GROUNDING - FOUNDATIONAL PART FAMILY SITUATION Outer Space, 33, and Tight Space, 29, have been married for 3 years. They have a daughter (3 years old) Partial Space, who suffers from cerebral palsy, a medical condition that requires her to be wheelchair-bound. Her current education is managed by the Spastic Children's Association School (SCAS). They also have a son aged 2 and now Tight Space is expecting their third child, a daughter, in August 2020. They do not intend to have any more children. Tight Space's parents: "Tight Space's father passed away recently. Her mother is healthy. "Outer Space's parents: Outer Spaces mother is 60 years old, is the only parent that he has, and resides with "Outer Space" and Tight Space. Outer Space provides her with an annual allowance of $6,000. FINANCIAL RATIOS (Existing - in 2018) Financial Ratios Basic Liquidity Ratio Debt Service Ratio Liquid Assets To Net worth Ratio Net Investment Asset to NW Ratio Debt-to-Asset Ratio 22 months 13.37% 39.04% 37.11% 43.15% EMPLOYMENT STATUS (Current - 2019) Outer Space is a self-employed Architectural Designer. For the last 5 years, he has drawn an average annual gross income of $78,000 and he has managed to save about $3,000 per month from 2015 till 2019. Tight Space is a Sales & Marketing Manager in a brand management company. She earns an annual gross income of $42,000 with a 1-month bonus. HOUSEHOLD EXPENSES (In 2019) The breakdown of annual household expenses ($60,050) incurred by Outer Space's family is as follows: Description Amount Tax $630.00 Saving $0.00 Food $10,000.00 Public Transportation $3,500.00 Clothing $3,500.00 Entertainment/Vacation $2,500.00 Medical/Dental Care $350.00 Utilities/ Household Expenses $8,800.00 Mortgage Repayment $15,450.00 "Outer Space's mother Allowance $6,000.00 Insurance Premium $1,820.00 Miscellaneous $7,500.00 Total Expenses $60,050.00 ASSETS (In 2019) Outer Space and Tight Space live at Upper Serangoon Road, in a 5-room HDB flat near Kovan MRT station. The property is registered as single owner. Today, it is worth $460,000 and has an outstanding loan of $320,000. CPF BALANCES (In 2019) Outer Space's current (approximate) balance in his CPF Ordinary Account is $35,000. The current (approximate) balance in his Special Account is $15,000. Tight Space's CPF Ordinary Account balance is $20,000 and Special Account $10,000. RISK MANAGEMENT (In 2019) The insurance portfolio for both Outer Space" and "Tight Space" can be broken down as follows: TYPE SUM ASSURED $40,000 CASH VALUE $9,600 PREMIUM PER ANNUM $1,010 NOMINATED BENEFICIARY Nil Whole Life ("Outer Space") Whole life (Tight Space") $40,000 $6,500 $810 Tight Space" ESTATE PLANNING (In 2019) Both Outer Space and Tight Space" do not have a Will. GAMBLING ANGUISH (In 2019) Outer Space is very concerned about Partial Space's medical condition and he thinks that the fastest way to accumulate wealth is to try his luck at the Integrated Resorts (IRs) and online betting. He started to gamble in 2019 as shown below: Casflow & Networth Statement Soccer Betting Penfolds IRS Barossa IRs Online Betting 31" Dec 18 Jan 2019 Mar 2019 May 2019 June 2019 His gambling luck was good initially and that spurred him to increase his betting amount. As time went on, he started to incur substantial losses. Tight Space only discovered Outer Space's gambling habit in late October 2019 and advised him to discontinue it. By that time, "Outer Space had liquidated the following liquid funds, equities and his insurance policy: Liquid Assets Amount Savings Account $60,000 Fixed Deposits $120,000 Singapore Equities $75,000 Insurance - Cash Value $9,600 Total Amount $264,600 Besides the above, Outer Space had also borrowed from banks and credit card companies to repay his gambling debts as shown below: Gambling Debt Marvellous Bank Loan Splendid Bank Loan Credit Card Loan Total Amount Amount $120,000 $80,000 $25,000 $225,000 Currently, Outer Space is servicing his gambling loan by making a monthly average repayment and loan interest of $5,000 and $875 respectively for the last 12 months. WEALTH PROTECTION - INSURANCE PLANNING "Tight Space went on a 5-month safari trip and forgot to leave instructions about her $40,000 whole life participating policy. "Tight Space" and her friend, "Neither Space, are business partners. For some reason, the back windows of their store had been broken numerous times by someone throwing rocks at the windows. Their insurance agent told them that their premiums were going to increase due to the number of claims. WEALTH ACCUMULATION - RETIREMENT PLANNING Tight Space's colleague Abnormal Space is 49 years old and intends to retire in 16 years' time at age 65. He has determined that he will need a capital sum of $2,354,000 at that time to provide for his retirement income. He presently has a retirement plan with a current amount of $350,000 to which he will add $26,000 per year. Abnormal Space assumes that his pre- retirement and post-retirement rates of return will be 8%, and that inflation will average 3%. He expects to live to at least age 80 but wants to use age 95 for all calculations. Retirement Planning Expense Method Required Retirement Amount Adjusted Rate of Return = 8% -3% = 5% 49 Current Age Future Value of Assets 65 Retirement 95 Expectancy 1st Year Retirement Income Q3b(i) Shortfall Q3b(1) Outer Space's 2nd sister, Forever Space," who is 38 years of age, is a private banker with Splendid Bank. 1b) Q1a) "Outer Space's" and "Tight Space's" Cash Flow Statement As at 31 December 2019 For the period 1.1.19 to 31.12.19 "Outer Space's" and "Tight Space's" Balance Sheet As at 31 December 2019 INFLOWS Active Gross salary and bonus (including employee CPF) Employer CPF Contribution TOTAL INFLOWS $123,500 $7,735 ASSETS Cash Savings Account Fixed Deposit Total Cash Equivalent $60.000 $120,000 $180,000 LIABILITIES & NET WORTH Liabilities Housing Loan Balance $320,000 Bank & Credit Card Loan $225,000 $131,235 TOTAL LIABILITIES $545,000 SO OUTFLOWS Savings Fixed Outflows Mortgage Repayment $15,450 *Outer Space's mother Allowance $6,000 Insurance Premium $1.820 Gambling Loan Repayment $60,000 Gambling Loan Interest Repayment $10,500 Total Fixed Outflows Invested Assets CPF Savings Singapore Equities Insurance - Cash Value Total Invested Assets $80.000 $75,000 $16.100 $171,100 Net Worth $266,100 $93.770 Assets for Personal Use Residence Total Personal Assets $460,000 $460,000 TOTAL ASSETS $811,100 TOTAL LIABILITIES & NET WORTH $811,100 Variable Outflows Food Public Transport Clothing Entertainment/Vacation Medical/Dental Care Utilities/Household Expenses Miscellaneous Total Variable Outflows TOTAL OUTFLOWS S630 $10.000 $3,500 $3,500 $2,500 $350 $8,800 $7,500 10) $38.780 $130,550 NET INFLOW $685 CASE STUDY VEALTH GROUNDING - FOUNDATIONAL PART FAMILY SITUATION Outer Space, 33, and Tight Space, 29, have been married for 3 years. They have a daughter (3 years old) Partial Space, who suffers from cerebral palsy, a medical condition that requires her to be wheelchair-bound. Her current education is managed by the Spastic Children's Association School (SCAS). They also have a son aged 2 and now Tight Space is expecting their third child, a daughter, in August 2020. They do not intend to have any more children. Tight Space's parents: "Tight Space's father passed away recently. Her mother is healthy. "Outer Space's parents: Outer Spaces mother is 60 years old, is the only parent that he has, and resides with "Outer Space" and Tight Space. Outer Space provides her with an annual allowance of $6,000. FINANCIAL RATIOS (Existing - in 2018) Financial Ratios Basic Liquidity Ratio Debt Service Ratio Liquid Assets To Net worth Ratio Net Investment Asset to NW Ratio Debt-to-Asset Ratio 22 months 13.37% 39.04% 37.11% 43.15% EMPLOYMENT STATUS (Current - 2019) Outer Space is a self-employed Architectural Designer. For the last 5 years, he has drawn an average annual gross income of $78,000 and he has managed to save about $3,000 per month from 2015 till 2019. Tight Space is a Sales & Marketing Manager in a brand management company. She earns an annual gross income of $42,000 with a 1-month bonus. HOUSEHOLD EXPENSES (In 2019) The breakdown of annual household expenses ($60,050) incurred by Outer Space's family is as follows: Description Amount Tax $630.00 Saving $0.00 Food $10,000.00 Public Transportation $3,500.00 Clothing $3,500.00 Entertainment/Vacation $2,500.00 Medical/Dental Care $350.00 Utilities/ Household Expenses $8,800.00 Mortgage Repayment $15,450.00 "Outer Space's mother Allowance $6,000.00 Insurance Premium $1,820.00 Miscellaneous $7,500.00 Total Expenses $60,050.00 ASSETS (In 2019) Outer Space and Tight Space live at Upper Serangoon Road, in a 5-room HDB flat near Kovan MRT station. The property is registered as single owner. Today, it is worth $460,000 and has an outstanding loan of $320,000. CPF BALANCES (In 2019) Outer Space's current (approximate) balance in his CPF Ordinary Account is $35,000. The current (approximate) balance in his Special Account is $15,000. Tight Space's CPF Ordinary Account balance is $20,000 and Special Account $10,000. RISK MANAGEMENT (In 2019) The insurance portfolio for both Outer Space" and "Tight Space" can be broken down as follows: TYPE SUM ASSURED $40,000 CASH VALUE $9,600 PREMIUM PER ANNUM $1,010 NOMINATED BENEFICIARY Nil Whole Life ("Outer Space") Whole life (Tight Space") $40,000 $6,500 $810 Tight Space" ESTATE PLANNING (In 2019) Both Outer Space and Tight Space" do not have a Will. GAMBLING ANGUISH (In 2019) Outer Space is very concerned about Partial Space's medical condition and he thinks that the fastest way to accumulate wealth is to try his luck at the Integrated Resorts (IRs) and online betting. He started to gamble in 2019 as shown below: Casflow & Networth Statement Soccer Betting Penfolds IRS Barossa IRs Online Betting 31" Dec 18 Jan 2019 Mar 2019 May 2019 June 2019 His gambling luck was good initially and that spurred him to increase his betting amount. As time went on, he started to incur substantial losses. Tight Space only discovered Outer Space's gambling habit in late October 2019 and advised him to discontinue it. By that time, "Outer Space had liquidated the following liquid funds, equities and his insurance policy: Liquid Assets Amount Savings Account $60,000 Fixed Deposits $120,000 Singapore Equities $75,000 Insurance - Cash Value $9,600 Total Amount $264,600 Besides the above, Outer Space had also borrowed from banks and credit card companies to repay his gambling debts as shown below: Gambling Debt Marvellous Bank Loan Splendid Bank Loan Credit Card Loan Total Amount Amount $120,000 $80,000 $25,000 $225,000 Currently, Outer Space is servicing his gambling loan by making a monthly average repayment and loan interest of $5,000 and $875 respectively for the last 12 months. WEALTH PROTECTION - INSURANCE PLANNING "Tight Space went on a 5-month safari trip and forgot to leave instructions about her $40,000 whole life participating policy. "Tight Space" and her friend, "Neither Space, are business partners. For some reason, the back windows of their store had been broken numerous times by someone throwing rocks at the windows. Their insurance agent told them that their premiums were going to increase due to the number of claims. WEALTH ACCUMULATION - RETIREMENT PLANNING Tight Space's colleague Abnormal Space is 49 years old and intends to retire in 16 years' time at age 65. He has determined that he will need a capital sum of $2,354,000 at that time to provide for his retirement income. He presently has a retirement plan with a current amount of $350,000 to which he will add $26,000 per year. Abnormal Space assumes that his pre- retirement and post-retirement rates of return will be 8%, and that inflation will average 3%. He expects to live to at least age 80 but wants to use age 95 for all calculations. Retirement Planning Expense Method Required Retirement Amount Adjusted Rate of Return = 8% -3% = 5% 49 Current Age Future Value of Assets 65 Retirement 95 Expectancy 1st Year Retirement Income Q3b(i) Shortfall Q3b(1) Outer Space's 2nd sister, Forever Space," who is 38 years of age, is a private banker with Splendid Bank. 1b) Q1a) "Outer Space's" and "Tight Space's" Cash Flow Statement As at 31 December 2019 For the period 1.1.19 to 31.12.19 "Outer Space's" and "Tight Space's" Balance Sheet As at 31 December 2019 INFLOWS Active Gross salary and bonus (including employee CPF) Employer CPF Contribution TOTAL INFLOWS $123,500 $7,735 ASSETS Cash Savings Account Fixed Deposit Total Cash Equivalent $60.000 $120,000 $180,000 LIABILITIES & NET WORTH Liabilities Housing Loan Balance $320,000 Bank & Credit Card Loan $225,000 $131,235 TOTAL LIABILITIES $545,000 SO OUTFLOWS Savings Fixed Outflows Mortgage Repayment $15,450 *Outer Space's mother Allowance $6,000 Insurance Premium $1.820 Gambling Loan Repayment $60,000 Gambling Loan Interest Repayment $10,500 Total Fixed Outflows Invested Assets CPF Savings Singapore Equities Insurance - Cash Value Total Invested Assets $80.000 $75,000 $16.100 $171,100 Net Worth $266,100 $93.770 Assets for Personal Use Residence Total Personal Assets $460,000 $460,000 TOTAL ASSETS $811,100 TOTAL LIABILITIES & NET WORTH $811,100 Variable Outflows Food Public Transport Clothing Entertainment/Vacation Medical/Dental Care Utilities/Household Expenses Miscellaneous Total Variable Outflows TOTAL OUTFLOWS S630 $10.000 $3,500 $3,500 $2,500 $350 $8,800 $7,500 10) $38.780 $130,550 NET INFLOW $685