Question 1 (35 marks) Winnie and Ken Wong are a married couple in their late-twenties and live in Hong Kong. Ken is a marketing manager in a logistic firm and Winnie works as an office assistant. Since their marriage 3 years ago, Ken and Winnie have been living comfortably. Their income has exceeded their expenses, and they have accumulated a positive net worth. Because their income has always been more than enough for them to have the lifestyle they desire, they have done no financial planning. Ken thinks that financial planning is only needed for those who suffer from heavy debt burden. Winnie have just found out that she is 2 months pregnant. She is concerned about their financial situation if she quits work after their child is born. Each time she and Ken discuss the matter, Ken tells her not to worry because weve always managed to pay our bills on time. Ken is very optimistic for their finances as he points out that his income is sufficient to cover expenses of necessities and they can reduce luxury trips, recreation and entertainment. Ken emphasized that Winnie can go back to work in few years if necessary. Despite Kens somewhat convincing arguments, Winnie feels that they should carefully examine their financial condition in order to start to plan for their personal finances. She has gathered the following financial information of the Wong family for the year ending December 31, 2019. Salaries Gross Salary Ken $384,000 Winnie $180,000 Item Amount Food purchases $ 68,000 Clothing purchases 26,000 Mortgage payments 147,000 Management fees 10,200 Utilities payments, including gas, electric and water bills 13,200 Market value of household furniture and stereo system 120,000 Prepaid phone and data SIM cards 3,200 Auto loan balance due 38,438 Common stock investments 301,553 Earnings from common stock investments 3,000 Bank credit card balances 12,615 Cash on hand 8,000 2016 Honda Jazz 98,000 Home insurance premium paid 1,030 Checking and saving accounts balance 50,000 MPF contributions 27,000 Auto insurance premium paid 3,175 Fees of vehicle license 5,794 Transportation including parking, gasoline and etc. 29,400 Market value of home 5,500,000 Trips to Japan and Europe 95,600 Recreation and entertainment 32,000 Auto loan payments 28,800 Credit card loan payments 30,000 Gifts and donations 18,000 Mortgage balance on home 2,508,000 Retirement accounts 128,000 Income taxes 24,340 3 REQUIRED a) Following the format used in textbook (P.49 & 52) / lecture note (Ch. 2), construct the personal balance sheet and cash flow statement for the year ending December 31, 2019 of Winnie and Ken Wong, the Wong family. (11 marks) b) Based on your observations on the financial statements in part a), discuss the potential financial difficulties the Wong family may encounter after new child is born. (Word limit: 300 words) (6 marks) c) Calculate the debt ratio, current ratio, liquidity ratio, debt-payment ratio and saving ratio. Interpret the implications and comment on the financial condition of the Wong family in terms of EACH of these FIVE ratios. (Word limit: 500 words) (15 marks) d) Point out and explain a misconception about financial planning in Kens arguments. (Word limit:150 words)