Question

Mike and Mary Jane Lee have a yearly income of $79,352 and own a house worth $102,100, two cars worth a total of $ 19,907 and furniture worth $10,442. The house has a mortgage of $58,347 and the cars have outstanding loans of $2,567 each. Utility bills, totaling $242 for this month, have not been paid. Calculate the debt ratio for the Lee household. Mike and Mary Jane's debt ratio is

Answer 1

Answer:

Total assets            $

Building                102,100

Motor vehicle       19,907

Furniture               10.442

Total assets          132,449

Total liabilities        $

Mortgage loan      58,347

Outstanding loan  2,567

Utility bills unpaid 242

Total liabilities       61,156

Debt ratio = Total liabilities   x 100

                     Total assets

Debt ratio = $61,156   x   100

                     $132,449

Debt ratio = 46.17%

Explanation:

In this case, there is need to calculate the total assets, which is the aggregate of building, motor vehicle and furniture.

We also need to calculate the total liabilities, which is the aggregate of mortgage loan, car loan outstanding and utility bills unpaid.

Debt ratio is obtained by dividing total liabilities by total assets multiplied by 100.