Financial Statements

Question 1

What formula is used to calculate the Debt Payments to Income Ratio?

Answer 1

Total Debt Payments/

Income

Question 2

Current Assets/
Monthly Nondiscretionary Living Expenses
is the formula for which financial ratio?

Answer 2

Emergency Fund Ratio

Question 3

The Retirement Savings Ratio is determined by what formula?

Answer 3

Household +Employer Retirement Plan Contributions/

Income

Question 4

Income/ Long−Term Debt Payments

is the formula for what financial ratio?

Answer 4

Long-Term Debt Coverage Ratio

Question 5

What is another name for the income and expense statement?

Answer 5

Statement of cash flows

Question 6

What is the formula and standard benchmark for the Debt Ratio?

Answer 6

Total Liabilities/ Total Assets

Benchmark: Ratio 

Question 7

Name the three primary categories in the asset section of the balance sheet.

Answer 7

1. Liquid assets
2. Investment assets
3. Personal use assets

Question 8

What is the formula for the current ratio and its standard benchmark?

Answer 8

Current Assets/Current Liabilities

Benchmark: Ratio > 1.0 or 100%

Question 9

Current assets can also be called what?

Answer 9

Monetary assets, cash, and cash equivalents

Question 10

What is a liability?

Answer 10

Liabilities are debts and other obligations that the individual or household has not paid off.

Question 11

Current liabilities are expected to be paid off within what time frame?

Answer 11

12 months

Question 12

What two formulas are used for the balance sheet?

Answer 12

Net Worth = Assets ‒ Liabilities

Assets = Liabilities + Net Worth