Answer:
(a) Liquidity ratio for individuals
basic liquidity ratio = cash assets / monthly expenses = $10,000 / $6,000 = 1.67
Depending on the maturity of the investment assets, the liquidity ratio could increase, but since the information is limited, we can only consider liquid assets. E.g. if the investment assets include bonds that mature in a very short term they should be included in this formula, but if they include bonds that mature in x number of years, then they aren't included.
(b) Asset-to-debt ratio
:
generally the formula is debt to asset ratio = $175,500 / $330,000 = 0.53
but here we are asked to find asset to debt = $330,000 / $175,500 = 1.88
(c) Debt service-to-income ratio
debt service to income ratio = monthly payments / gross income = ($250 + $2,100) / $9,000 = $2,350 / $9,000 = 0.26
(d) Debt payments-to-disposable income ratio
debt payments to disposable income ratio = monthly payments / disposable income = ($250 + $2,100) / $6,800 = $2,350 / $6,800 = 0.35
