Calculating debt safety ratio using Worksheet 7.1.  Prepare an inventory of Leo’s consumer debt. Find his debt safety ratio given that his take-home pay is $2,500 per month. Would you consider this ratio to be good or bad? Explain.    Every six months, Leo Perez takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $4,000 on a home improvement loan (monthly payments of $125); he is making $85 monthly payments on a personal loan with a remaining balance of $750; he has a $2,000, secured, single-payment loan that’s due late next year; he still owes $8,600 on a new car loan (monthly payments of $375); and he has a $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his Shell credit card (balance due in 30 days), and a $1,200 balance on a personal line of credit ($60 monthly payments).

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Calculating debt safety ratio using Worksheet 7.1.  Prepare an inventory of Leo’s consumer debt. Find his debt safety ratio given that his take-home pay is $2,500 per month. Would you consider this ratio to be good or bad? Explain. 

 

Every six months, Leo Perez takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $4,000 on a home improvement loan (monthly payments of $125); he is making $85 monthly payments on a personal loan with a remaining balance of $750; he has a $2,000, secured, single-payment loan that’s due late next year; he still owes $8,600 on a new car loan (monthly payments of $375); and he has a $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his Shell credit card (balance due in 30 days), and a $1,200 balance on a personal line of credit ($60 monthly payments).  

 

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