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

your debt and net worth
2. One of the more important ratios is the debt ratio which compares_________

3. What would you like to see your debt ratio over time? decreasing over time

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? false, higher number is better

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
enough liquid asset to pay living expenses in 2
8. What does it mean if liquidity ratio is 2.0? months if emergency arises

9. The higher current ratio is better. True or False? True

 unstable job industry
unemployment
10.Why does emergency fund important? pandemic
accidents...
11.How much should we set the minimum amounts for emergency fund?
emergency fund of at least 3 months living expenses
12.A debt-payment ratio indicates how much of a person's earnings is required
to pay __________________________.
monthly credit 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
Take-home pay: Earnings after
C. Dividing total debts by total assets deductions for taxes and other
D. Dividing liquid assets by total liabilities items; also called disposable
income
14.What do financial planners recommend to the debt-payment ratio? less than 20%

15.The savings ratio compares ____________________________________

saving amount and gross income

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