Explain to the barker their current financial situation

Assignment Help Financial Accounting

Reference no: EM133344973

Question: Frank and Elaine Barker are married, in their early forties, and have two 10 year old twins. Frank works as an IT administrator and earns $70,000 each year. Elaine is a project manager with a software company and earns $76,000 each year. They own their own home that they purchased 10 years ago. They have worked hard to spend within their means and not take on any unnecessary debt. They are meeting with you today to discuss their current financial situation and a savings strategy for their children's education and for their retirement. The Barker's find themselves in a position now where they have additional cash flow and they want your help to determine the best strategies.

They have provided you with their financial information and their financial statements and ratios have been prepared below:

Net Worth Statement

Frank & Elaine

Year Ending 20XX

Assets:

Chequing Account

Emergency Fund - TFSA

Cars

Personal Possessions

House

Total Assets

$4,000

$10,000

$32,000

$25,000

$825,000

$896,000

Liabilities:

Car Loan

Mortgage

Total Liabilities

$14,000

$435,000

$449,000

Net Worth:

$457,000

Financial Ratio	Value
Emergency Fund Ratio	1.68
Debt Ratio	0.98
Debt Payment Ratio	0.042
Savings Ratio	0

Cash Flow Statement

Frank & Elaine

Year Ending 20XX

Cash Inflows:

Gross Income

Deductions (CPP, EI, Taxes)

Net Income (Take home pay)

$151,000

$38,000

$113,000

Cash Outflows:

Mortgage Payment

Property tax

Children's Activities

Heat

Other Utilities

Home insurance

Auto insurance & Maintenance

Gasoline

Food

Entertainment

Clothing

Other expenses/Vacation

Car loan payment

Miscellaneous Expenses

Total Expenses

$38,652

$7,700

$5,000

$3,400

$3,600

$1,900

$2,500

$3,600

$7,600

$6,000

$3,400

$6,000

$4,800

$6,000

$100,152

Surplus

$12,848

Requirements:

a) Analyze and explain to the Barker's their current financial situation by commenting on their financial statements and ratios.

b) What three recommendations would you make to the Barker's to most improve their current financial well-being and work towards their goals? Explain the benefits and drawbacks of each recommendation.

Reference no: EM133344973

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