Section 2 Debt Management

Question 1

What ratio answers the question, have I taken on too much debt?

Answer 1

the Debt Ratio

Question 2

What would a debt ratio of .24 mean?

Answer 2

This means that 24% of your assets have been financed w borrowed debt

Question 3

what is the debt ratio equation

Answer 3

debt (or liabilities) / total assets = Debt Ratio

Question 4

What does the long-term debt ratio tell you?

Answer 4

How many times you could make your long-term debt payments with your current income

Question 5

A long-term debt ratio lower than ___ is not financially desirable

Answer 5

2.5

Question 6

What is the equation for the long-term debt ratio

Answer 6

total income available for living expenses / total long-term debt payment

Question 7

Financial planners use the debt resolution rule to help control debt obligations. These exclude borrowing associated with ___ and ___

Answer 7

education and home financing

Question 8

The debt resolution rule forces you to pay off all your outstanding debt every

Answer 8

four years

Question 9

the debt limit ratio is simply a measure of the % of your take-home pay taken up by

Answer 9

non-mortgage debt payments

Question 10

The recommended maximum debt limit ratio should not exceed

Answer 10

20%

Question 11

A consumer’s total debt can be divided into ___ and ____

Answer 11

consumer debt and mortgage debt