Active endeavors specializes in sporting equipment. recently, it has decided to add to its business units by opening a steakhous
1 answer:
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Answer:
a) 27.2%
b) No
Explanation:
Given:
Monthly gross income = $2,000
Federal, state, and local income taxes = $400
Social Security taxes per month = $160
IRA per month = $80
Monthly credit payments for Visa, = $35
Monthly credit payments for MasterCard, = $30
Monthly credit payments for Discover cards = $20
Automobile loan payment = $285
Now,
Net income of Louise = Gross income - Total Taxes - IRA
= $2,000 - ( $400 + $160 ) - $80
= $1,360
Total debt payments = Credit card payments + Automobile loan payment
= ( $35 + $30 + $20 ) + $285
= $370
Therefore,
Debt payments-to-income ratio =
=
= 0.272
or
= 0.272 × 100% = 27.2%
(b) An individual should not spend more than 20% of their net income as debt to be within the means.
Since, the debt payments-to-income ratio exceeds 20 percent of her net income.
Hence, Louise is not living within her means