Financial Statements and Analysis

Question 1

What are personal financial statements used for

Answer 1

as a scoring mechanism for capturing and analyzing and individuals financial position and performance

Question 2

What do personal financial statements consists of?

Answer 2

Balance Sheet and Income and Expense Statement

Question 3

What is a Balance Sheet

Answer 3

list of assets, liabilities and net worth

Question 4

What are the asset and liability categories for balance sheet

Answer 4

Assets: Cash and Cash equivalents and current assets, invested assets, personal use assets
Liabilities- current and long term liabilities

Question 5

What is ratio analysis

Answer 5

its to give insight of financial situation and behavior of client, also generates more questions

Question 6

What are the types of liquidity ratios

Answer 6

Current Ratio, Emergency Fund

Question 7

Equations for current and emergency fund ratios

Answer 7

Current Ratio: current assets-current liabilities
Emergency Fund: current assets/ monthly non discretionary

Question 8

What are the types of debt ratios and equation

Answer 8

Housing 28% ratio:
(monthly housing -principal, interest, tax, homeowners)/ monthly gross income

Question 9

What are the types of performance ratios with equations

Answer 9

Savings Ratio:
annual savings(employee +employer)/annual gross income

Rate of Return:
(end invest-begin invest-savings-gifts received)/ avg invested assets

AVG invested: begin invest+end invest /2