Rudabeh, 34, and Donovan, 31, want to buy their first home. Their current combined net income is $69 comma 00069,000 and they have two auto loans totaling $29 comma 00029,000. They have saved approximately $14 comma 00014,000 for the purchase of their home and have total assets worth $ 55 comma 000$55,000, which are mostly savings for retirement. Donovan has always been cautious about spending large amounts of money, but Rudabeh really likes the idea of owning their own home although she hasn't expressed her preference to Donovan. They do not have a budget, but they do keep track of their expenses, which amounted to $ 57 comma 000$57,000 last year, including taxes. They pay off all credit card bills on a monthly basis and do not have any other debt or loans outstanding. Other than that, they do not spend a great deal of time tracking their finances. a. What financial statements should Rudabeh and Donovan prepare to begin realizing their home purchase goal? What records should they use to compile these statements? b. Calculate their net worth and income surplus. c. Calculate and interpret their month's living expenses covered ratio and their debt ratio. d. What other information would be necessary or helpful to develop more complete statements? e. What six- to eight-step process should Rudabeh and Donovan undertake to develop a budget? f. Why might adopting Principle 6: Waste Not, Want Notlong dash—Smart Spending Matters be important to Rudabeh and Donovan, given their goal of home ownership? g. What recommendations do you have for Rudabeh and Donovan regarding financial communication? Question content area bottom Part 1 a. What financial statements should Rudabeh and Donovan prepare to begin realizing their home purchase goal? (Select the best answer below.) A. They should prepare an income statement and a balance sheet. Your answer is correct. B. They should prepare an income statement. Since they keep track of their expenses, they do not need a balance sheet. C. They should prepare a balance sheet. Since they know what their net income is, they do not need an income statement. D. They should prepare an income statement, a balance sheet, and a net worth statement. Part 2 What records should they use to compile these statements? (Select all that apply.) A. Long-term debt payments B. Any outstanding I.O.U.s C. Variable living expenses D. Short-term debt payments E. 401(k) statement F. Fixed living expenses G. Paycheck stub
Rudabeh, 34, and Donovan, 31, want to buy their first home. Their current combined net income is $69 comma 00069,000 and they have two auto loans totaling $29 comma 00029,000. They have saved approximately $14 comma 00014,000 for the purchase of their home and have total assets worth $ 55 comma 000$55,000, which are mostly savings for retirement. Donovan has always been cautious about spending large amounts of money, but Rudabeh really likes the idea of owning their own home although she hasn't expressed her preference to Donovan. They do not have a budget, but they do keep track of their expenses, which amounted to $ 57 comma 000$57,000 last year, including taxes. They pay off all credit card bills on a monthly basis and do not have any other debt or loans outstanding. Other than that, they do not spend a great deal of time tracking their finances. a. What financial statements should Rudabeh and Donovan prepare to begin realizing their home purchase goal? What records should they use to compile these statements? b. Calculate their net worth and income surplus. c. Calculate and interpret their month's living expenses covered ratio and their debt ratio. d. What other information would be necessary or helpful to develop more complete statements? e. What six- to eight-step process should Rudabeh and Donovan undertake to develop a budget? f. Why might adopting Principle 6: Waste Not, Want Notlong dash—Smart Spending Matters be important to Rudabeh and Donovan, given their goal of home ownership? g. What recommendations do you have for Rudabeh and Donovan regarding financial communication? Question content area bottom Part 1 a. What financial statements should Rudabeh and Donovan prepare to begin realizing their home purchase goal? (Select the best answer below.) A. They should prepare an income statement and a balance sheet. Your answer is correct. B. They should prepare an income statement. Since they keep track of their expenses, they do not need a balance sheet. C. They should prepare a balance sheet. Since they know what their net income is, they do not need an income statement. D. They should prepare an income statement, a balance sheet, and a net worth statement. Part 2 What records should they use to compile these statements? (Select all that apply.) A. Long-term debt payments B. Any outstanding I.O.U.s C. Variable living expenses D. Short-term debt payments E. 401(k) statement F. Fixed living expenses G. Paycheck stub
Chapter13: Investment Fundamentals
Section: Chapter Questions
Problem 1FPC
Related questions
Question
Rudabeh, 34, and Donovan, 31, want to buy their first home. Their current combined net income is
$69 comma 00069,000
and they have two auto loans totaling
$29 comma 00029,000.
They have saved approximately
$14 comma 00014,000
for the purchase of their home and have total assets worth
$ 55 comma 000$55,000,
which are mostly savings for retirement. Donovan has always been cautious about spending large amounts of money, but Rudabeh really likes the idea of owning their own home although she hasn't expressed her preference to Donovan. They do not have a budget, but they do keep track of their expenses, which amounted to
$ 57 comma 000$57,000
last year, including taxes. They pay off all credit card bills on a monthly basis and do not have any other debt or loans outstanding. Other than that, they do not spend a great deal of time tracking their finances.a. What financial statements should Rudabeh and Donovan prepare to begin realizing their home purchase goal? What records should they use to compile these statements?
b. Calculate their net worth and income surplus.
c. Calculate and interpret their month's living expenses covered ratio and their debt ratio.
d. What other information would be necessary or helpful to develop more complete statements?
e. What six- to eight-step process should Rudabeh and Donovan undertake to develop a budget?
f. Why might adopting Principle 6: Waste Not, Want
Notlong dash—Smart
Spending Matters be important to Rudabeh and Donovan, given their goal of home ownership?g. What recommendations do you have for Rudabeh and Donovan regarding financial communication?
Question content area bottom
Part 1
a. What financial statements should Rudabeh and Donovan prepare to begin realizing their home purchase goal? (Select the best answer below.)
They should prepare an income statement and a balance sheet.
They should prepare an income statement. Since they keep track of their expenses, they do not need a balance sheet.
They should prepare a balance sheet. Since they know what their net income is, they do not need an income statement.
They should prepare an income statement, a balance sheet, and a net worth statement.
Part 2
What records should they use to compile these statements? (Select all that apply.)
Long-term debt payments
Any outstanding I.O.U.s
Variable living expenses
Short-term debt payments
401(k) statement
Fixed living expenses
Paycheck stub
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