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18 Cards in this Set
- Front
- Back
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Personal Balance Sheet
balances & equations * Net worth * Total assets |
snapshot
Net worth = assets – liabilities Total assets = total liabilities + net worth |
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Balance sheet elements
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Assets
* Investments * Retirement * Personal use assets Liabilities * Current * Long-term Net worth |
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Net worth
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Total liabilities + net worth complete the right side of balance sheet, and must equal assets
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Personal Cash Flow Statement
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income actually received (cash inflows)during specific period of time & expenditures (cash outflows)
Cash inflow – cash outflow = cash surplus or discretionary income |
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Cash inflow
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Earnings
Interest Dividends Deductions are reflected in outflow |
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Cash outflow
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Living expenses
Asset purchases Tax payments Debt payments Include only actuals – what is paid out in cash With home mortgages, include insurance and taxes if in escrow account Categories |
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Relationship between BS and Cash flow
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Cash flow will show change in position btwn 2 balance sheet periods
Living expenses = cash flow Asset is balance sheet Example: a living expense (furniture) can be a cash outflow and an asset (balance sheet) |
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Reduction of cash
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Decrease in liability
Increase asset Increase cash outflow |
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cash surplus will . . .
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Cash surplus will increase net worth
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Emergency funds
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Liquid assets accumulated for providing coverage during decrease in cash outflow
3 – 6 months Cash and cash equivalent Lines of credit do not substitute for emergency funds CDs less than 90 day maturity Life insurance cash value |
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Current ratio
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Assets/liabilities
Higher ratio = better; greater ability to satisfy debts |
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Acid test ratio or quick ratio
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Cash & cash equivalents & accounts receivables/current liabilities
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Savings ratio
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Cash surplus/net income (after taxes)
5-8% |
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Consumer debt ratio
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Monthly consumer debt/net income
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Housing cost ratio
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Monthly payment (P&I) + insurance + taxes + HOA/monthly gross income
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Total debt ratio
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Housing + consumer + personal (eg alimony)/gross income
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Personal record-keeping
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Bank statements
Credit card statements Insurance info and agents Medical expenditures & records Tax returns Home improvements Trusts Wills Employee benefits Investments |
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balance sheet
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personal financial status at a moment in time = snapshot
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