05 Measuring Your Financial Health

05 Measuring Your Financial Health - 1/20/2010 Review...

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1/20/2010 1 Chapter 2: part 2 Measuring your financial health Review Chapter 2 pt. 1 | Balance sheet | | Net Worth | Personal Income Statemen Personal Income Statement | | Fair Market Value | Budget Using Ratios: A Financial Thermometer | Analyzes the raw data from your balance sheet and income statement to identify your financial strengths and weaknesses. | Allows you to answer the following questions…… Question 1: Do You Have Adequate Liquidity? | Liquidity : the relative ease and speed with which you can convert noncash assets into assets. Ratios | Ratios to determine whether or not you have enough monetary assets z (1) to pay for an unexpected large expense or z (2) to tide you over during periods of reduced or eliminated earnings. Liquidity ratios 1. Current ratio 2. Month’s living expenses covered ratio
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1/20/2010 2 Current Ratio | monetary assets current liabilities | Shows whether you have enough liquid assets to cover expenses currently due. | Ratio greater than 2 recommended Monetary Assets: | Cash or other assets that can be easily liquidated | Examples -- cash, checking accounts, savings accounts Your Liabilities: What You Owe | Current liabilities are liabilities that must be paid-off within the next year. z
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This note was uploaded on 06/06/2011 for the course HACE 3200 taught by Professor B during the Spring '09 term at University of Georgia Athens.

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05 Measuring Your Financial Health - 1/20/2010 Review...

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