Personal Finance: An Integrated Planning Approach. Winger and Frasca Chapter 3 Financial Statements and Budgets: Where Are You Now and Where Are You Going?. Introduction. This chapter explains the use of financial statements for evaluating financial performance.
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Winger and Frasca
Financial Statements and Budgets:
Where Are You Now and Where Are You Going?
Assets (A) = Liabilities (L) + Net Worth (NW)
A = $10,000; L = $6,000; therefore, NW = $4,000.
this year’s nominal income
last year’s nominal income
* Take-Home Pay = Salaries of $75,600 - Payroll Taxes of $14,570
Liquid Assets/ Take-Home Pay =
$16,240/$61,030 = 0.266 (Fair)
They have 3.2 months. The recommendation is 3–6 months
Liquid Assets/Current Liabilities =
$16,240/$8,354 = 1.94 (Good; > 1)
Total Liabilities/Total Assets =
$168,149/$325,540 = 0.517 (fair)
This ratio should be less than .50
Take-Home Pay/Debt Service Charges =
$61,030/$24,133 = 2.53 (some weakness)
Ideally, this ratio should be 3.0 or more
Month Budget Actual Variance Variance
January $80 $ 88.00 ($8.00) ($8.00)
February $80 102.00 (22.00) (30.00)
March $80 91.00 (11.00) (41.00)
April $80 39.00 41.00 -0-
Spending was adjusted in April to eliminate variance