Hasan Fareed, a 24-year-old college graduate, never took a personal finance class. He pays his bills on time, has managed to save a little in an investment account, and with the help of an inheritance managed to buy a condominium. Hasan worries about his financial situation. Given the following information:

Question

Hasan Fareed, a 24-year-old college graduate, never took a personal finance class. He pays his bills on time, has managed to save a little in an investment account, and with the help of an inheritance managed to buy a condominium. Hasan worries about his financial situation. Given the following information:

1- prepare a personal cash flow statement

2- personal balance sheet

3- calculate the current ratio, liquidity ratio, debt-to-assets ratio associated with Hasan's

personal financial statements. Interpret these ratios for Hasan.

In addition to the list of monthly expenses, assets, and liabilities below, Hasan offers this information:

 All utility bills for the month are unpaid, and therefore appear as a current liability (phone, cable, electricity, natural gas, water/sewer).

 Auto and mortgage payments have been paid for the month; note that he lists "mortgage outstanding" and "auto loan outstanding" to indicate the outstanding amount remaining to pay off each loan.

 "Other expenses, monthly" represents cash spent without a record to verify where.

 Hasan charges everything on his credit cards and pays the balances off monthly. Credit card

bills represent his average monthly balance.

 Semi-annual auto insurance premium payment is due this month.

List of monthly expenses, assets, and liabilities:

Visa bill

Stocks

MasterCard bill

Monthly paycheque, net Mortgage payment, monthly Phone bill

Cable bill

Investment account (bank) RRSP

Car payment, monthly Electricity bill

Natural gas bill

$1355 Water and sewer bill 5500 Savings account

645 Chequing account

4700 Auto insurance, semi-annual 1030 Residence

$ 50 3100 1825

450 265 000 425 42 Auto 9000 1800 Furnishings 5500

85 Food, monthly

4500 Mortgage outstanding 435 Auto loan outstanding

60 Other personal property 70 Other expenses, monthly

202 000 4225 1800 350

Answer 1

To prepare a personal cash flow statement for Hasan Fareed, we need to analyze his income and expenses for a specific period, such as a month. Let's start by categorizing the given information:

Income:
- Monthly paycheque, net: $3100

Expenses:
- Mortgage payment, monthly: $1825
- Phone bill: $50
- Cable bill: $60
- Electricity bill: $425
- Natural gas bill: $42
- Water and sewer bill: $1355
- Auto insurance, semi-annual: $1800 (monthly portion is $300)
- Food, monthly: $450
- Other expenses, monthly: $70

Next, we need to consider the unpaid bills that appear as current liabilities:
- Visa bill
- MasterCard bill

We should also consider Hasan's assets:
- Stocks: $5500
- Investment account (bank): $450
- RRSP: $265
- Savings account: $4700
- Chequing account: $1030
- Auto: $9000
- Residence: $202,000
- Furnishings: $1800
- Other personal property: $60

Finally, we need to consider Hasan's outstanding debts:
- Mortgage outstanding: $435,000
- Auto loan outstanding: $4225

Now, let's calculate the personal cash flow:

1. Calculate the total income:
Total Income = Monthly paycheque, net = $3100

2. Calculate the total expenses:
Total Expenses = Mortgage payment, monthly + Phone bill + Cable bill + Electricity bill + Natural gas bill + Water and sewer bill + Auto insurance, semi-annual (monthly portion) + Food, monthly + Other expenses, monthly
= $1825 + $50 + $60 + $425 + $42 + $1355 + $300 + $450 + $70
= $4077

3. Calculate the net cash flow:
Net Cash Flow = Total Income - Total Expenses
= $3100 - $4077
= -$977

Based on the calculations, the net cash flow for Hasan Fareed is negative, indicating that his expenses exceed his income. This may be a cause for concern in his financial situation.