Understanding Personal Financial Ratios for Living Expenses, Debt, and Savings, Slides of Fundamentals of E-Commerce

Download Understanding Personal Financial Ratios for Living Expenses, Debt, and Savings and more Slides Fundamentals of E-Commerce in PDF only on Docsity! Month’s Living Expenses Covered Ratio • monetary assets month’s living expenses • This ratio tells you how many months living expenses you can cover with your present level of monetary assets. Docsity.com Interpretation • The rule of thumb: 3 to 6 months of expenses • Factors that affect the rule of thumb: – Available credit cards or home equity loans – Potential for higher earnings on less liquid accounts – Stability of income • Track the trend and if going down--make changes Docsity.com Interpretation • Represents percentage of assets financed with borrowing • Track the trend; ratio should go down with age Docsity.com Long-term Debt Coverage Ratio • total income available for living expenses total long-term debt payment • This ratio tells you how many times you could make your debt payments with your current income. Docsity.com Interpretation • Ratio of 2.5 or greater recommended • Track the trend and if going down -- make changes • Consider the inverse --the percentage of take-home pay needed to repay debt Docsity.com