Chapter 2-Measuring Financial Health - Measuring Financial Health Where are you today Balance sheet o Most of loans require it o Business loan for sure

Chapter 2-Measuring Financial Health - Measuring Financial...

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Measuring Financial Health Where are you today? Balance sheet o Most of loans require it o Business loan for sure Income statement o “Budget” o income and expense statement (“P&L”) Financial Ratios o Benchmark on how you’re doing Recordkeeping Budgeting o Projections of your income and expenses Balance Sheet What you own and how you have paid for it What you own vs what you owe o On a given date Terms: o Assets – what you own Listed at fair market value o Liabilities – your debts, what you owe to someone o Net worth – your debts, what you owe to someone Net worth = Assets Liabilities Balance Sheet – Assets Monetary Assets o Cash, checking, savings, CDs, MMAs, emergency funds Investments (non-retirement) o Stocks, bonds, mutual funds, real estate o Cash value of life insurance, annuities Retirement Assets o Value of IRAs, 401K, pensions Housing o Value of owned residences Automobiles o Value of all autos Personal Property o Collections, clothing, furnishing, etc. Other o Anything else you own that’s not listed
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o Value (equity) of any businesses you own o Money owed to you Balance Sheet – Liabilities What you legally owe as of TODAY Current liabilities – due within 1 year o Payables – bills you owe but haven’t paid yet Utilities, taxes, insurance premiums, etc. o Credit card balances (principal only) Long-term or non-current liabilities o Principle remaining on each loan Auto loans, mortgage, consumer loans, student loans Balance Sheet – Net Worth What you are “worth” (in $); your “wealth” Net Worth = Total Assets – Total Liabilities Not a measure of self-worth Want it to be positive o
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