Concept explainers
a
Case summary: HJ and BJ both are employed, decided to begin financial planning, they have determined fair market price of their tangible assets from various sources available and they have used ratio analyses. They also worked for reducing their budgetary estimates by using the information available.
Characters in the case: HJ and BJ.
Adequate Information: HJ’s earns salary of $4,080 per month and also receives $3,000 in interest and BJ earns salary of $6,400 per month expecting increase in rent for $100 a month. They have decided to begin financial planning and have to determine the fair market price of their tangible investments. They are required to use different tools of financial ratios to interpret financial statements. They have to established long term-goals. They did some calculations to determine how much they had to save for each goals and created financial statements, budgets and analysis. It is required to make specific recommendations how they can reduce budgetary estimates.
To determine: The way H and B determined the fair market prices of their tangible and investment assets.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
b
Case summary: HJ and BJ both are employed, decided to begin financial planning, they have determined fair market price of their tangible assets from various sources available and they have used ratio analyses. They also worked for reducing their budgetary estimates by using the information available.
Characters in the case: HJ and BJ.
Adequate Information: HJ’s earns salary of $4,080 per month and also receives $3,000 in interest and BJ earns salary of $6,400 per month expecting increase in rent for $100 a month. They have decided to begin financial planning and have to determine the fair market price of their tangible investments. They are required to use different tools of financial ratios to interpret financial statements. They have to established long term-goals. They did some calculations to determine how much they had to save for each goals and created financial statements, budgets and analysis. It is required to make specific recommendations how they can reduce budgetary estimates.
To determine: Liquidity ratio, asset-to-debt ratio, debt-to-income ratio, debt payments-to-disposable income ratio, and investment assets-to-total assets ratio are to be calculated using data from the cash flow statement developed by H and B along with suggestion given by these ratio’s about the financial situation of H and B and whether H and B should incur more debt.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
c
Case summary: HJ and BJ both are employed, decided to begin financial planning, they have determined fair market price of their tangible assets from various sources available and they have used ratio analyses. They also worked for reducing their budgetary estimates by using the information available.
Characters in the case: HJ and BJ.
Adequate Information: HJ’s earns salary of $4,080 per month and also receives $3,000 in interest and BJ earns salary of $6,400 per month expecting increase in rent for $100 a month. They have decided to begin financial planning and have to determine the fair market price of their tangible investments. They are required to use different tools of financial ratios to interpret financial statements. They have to established long term-goals. They did some calculations to determine how much they had to save for each goals and created financial statements, budgets and analysis. It is required to make specific recommendations how they can reduce budgetary estimates.
To discuss: The specific recommendations and the way they can reduce their budget estimates without drastically affecting their lifestyle.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
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Chapter 3 Solutions
Personal Finance (MindTap Course List)
- Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of 25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is 1,100 per year. In addition to the salaries, Elliott spends 27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. 4. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing costs are relevant? By how much will purchasing costs increase if the order is accepted? (b) Suppose that the special order causes 700 additional purchase orders. How will your answer to (a) change?arrow_forwardHassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen prospective renters, but he makes the final decision on all rentals. He also is responsible for setting the weekly rental price of the house. During the current year, the house rents for 1,500 per week. Hassad pays a commission of 150 and a cleaning fee of 75 for each week the property is rented. During the current year, he incurs the following additional expenses related to the property: a. What is the proper tax treatment if Hassad rents the house for only 1 week (7 days) and uses it 50 days for personal purposes? b. What is the proper tax treatment if Hassad rents the house for 8 weeks (56 days) and uses it 44 days for personal purposes? c. What is the proper tax treatment if Hassad rents the house for 25 weeks (175 days) and uses it 15 days for personal purposes?arrow_forwardYour client is a partnership, ARP Associates, which is an engineering consulting firm. Generally, ARP bills clients for services at the end of each month. Client billings are about 50,000 each month. On average, it takes 45 days to collect the receivables. ARPs expenses are primarily for salary and rent. Salaries are paid on the last day of each month, and rent is paid on the first day of each month. The partnership has a line of credit with a bank, which requires monthly financial statements. These must be prepared using the accrual method. ARPs managing partner, Amanda Sims, has suggested that the firm also use the accrual method for tax purposes and thus reduce accounting fees by 600. Assume that the partners are in the 35% (combined Federal and state) marginal tax bracket. Write a letter to your client explaining why you believe it would be worthwhile for ARP to file its tax return on the cash basis even though its financial statements are prepared on the accrual basis. ARPs address is 100 James Tower, Denver, CO 80208.arrow_forward
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