CHAPTER 2 : PERSONAL FINANCE RECORD KEEPING (BALANCE SHEET (Assets…
CHAPTER 2 : PERSONAL FINANCE RECORD KEEPING
Personal finance record keeping is also known as
personal financial statements
PERSONAL FINANCIAL STATEMENTS
= BALANCE SHEET AND CF STATEMENT
that help achieve a desired quality of life.
that are being purchased to obtain extra or side income.
Can be converted into cash immediately with a minimum amount of inconvenience and these assets have a stable MV.
debts that have maturity up to one year. example is utility bills also known as bills for direct purchase and credit cards, payment for loan installments, payments for a personal loan or a computer loan that are due within 1 year.
debts with a maturity of more than 1 year. two groups:-
Non-current portion of loans with specific repayment schedules. Eg:-
Installment loans on cars
Non-current portion of liabilities without specific repayment schedules.
A difference between assets and liabilities.
CASH FLOW STATEMENT
It will indicate a person's financial position.
It helps in designing a person's budget.
Level of Debt
Debt ratio = Total Liabilities / Total Assets
Debt service coverage ratio = Take-home pay / Debt service charges
Liquid Assets to take-home pay ratio = Liquid Assets / Take-home pay
Current ratio = Liquid Assets / Current Liabilities