Ratios for Evaluating Financial Progress

1. Functions of several different ratios are:

A. To determine financial health

B. To balance work-life

C. To meet financial goal

D. To make plan for guest list of the wedding

2. One of the more important ratios is the debt ratio which compares_________
debts & net worth

3. What would you like to see your debt ratio over time? - reduce/ decrease

4. The __________________ ratio compares your liquid assets to your current

liabilities.
A. Debt

B. Savings
C. Liquidity

D. Debt-payment ratio
E. Current

5. What does it mean if current ratio is 2.5? - Indicates $2.5 in liquid assets for every $1 of current liabilities

6. The lower current ratio is better. True or False? F - higher

living expenses
6. A liquidity ratio indicates the number of months in which _______________
can be paid if an emergency arises.

7. A liquidity ratio is calculated by:

A. Dividing total debts by total assets
B. Dividing liquid assets by monthly expenses
C. Dividing liquid assets by current liabilities
D. Diving total liabilites by net worth

8. What does it mean if liquidity ratio is 2.0? Indicates 2m in which living expenses can be paid if
an emergency arises
9. The higher current ratio is better. True or False?
10.Why does emergency fund important? - unemploument/ unstable job/ pandemic/ accident/ ...

11.How much should we set the minimum amounts for emergency fund? - 3m

12.A debt-payment ratio indicates how much of a person's earnings is required

to pay __________________________.
monthly debt payment

13.This debt-payment ratio is calculated by

A. Dividing total assets by total liabilities
B. Dividing monthly credit payments by your take-home pay
C. Dividing total debts by total assets (disposable inc - earnings after
deductions for taxes and other
D. Dividing liquid assets by total liabilities items; also called disposable inc)

14.What do financial planners recommend to the debt-payment ratio? < 20%

15.The savings ratio compares ____________________________________

montly savings o gross inc (monthly salary)

16.What do financial planners recommend to the savings ratio ratio? 5% - 10%