Question Completion:
The Worthington family has liquid assets of $10,000, use assets of $150,000 and investment assets of $34,000. They also have liabilities totaling $108,000. They need a loan from the bank and to qualify for the loan, they must have a net worth of $100,000. They will incur additional $7,000 in liabilities.
Answer:
1. The Worthington Family's net worth is:
= $79,000.
2. No. They will not qualify for the loan, as their net worth fell short of the requirement by $21,000.
Step-by-step explanation:
a) Data and Calculations:
Worthington Family's net worth:
Liquid assets = $10,000
Use assets = 150,000
Investment assets = 34,000
Total assets = $194,000
Liabilities = 115,000
Net worth = $79,000
Required net worth = $100,000
Shortfall in net worth = $21,000
b) The Worthington Family's net worth is the difference between their assets (the things that they own) and their liabilities (the things that they owe others). It is an important financial metric for calibrating the family's financial health. Computing it provides a useful snapshot of the family's current financial position. Financial institutions and other potential creditors use it to gauge if they might extend some credit facilities to the Worthington family.
