Mia has monetary assets that total $2,500 and annual living expenses that total $12,000 her emergency fund ratio is 2.50
Calculation of emergency fund ratio:
Formula;
Emergency fund ratio = Cash & cash equivalents / monthly non-discretionary expenses
Now put values in the formula;
Emergency fund ratio = $2,500 / $1,000
Emergency fund ratio = 2.50
The emergency fund ratio, or liquidity ratio, is a personal finance ratio that measures a household's ability to cover expenses from assets that can be easily converted to cash.
Calculated by dividing the household's total current assets by the household's total monthly expenses.
Learn more about the emergency fund ratio here:
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