8. Financial statement ratios

Financial Statement Ratios

Financial statement ratios play an important role in understanding and interpreting financial data. The solvency, liquidity, savings, and debt service ratios are important tools that will provide you with information, helping you chart and improve your personal financial planning.

Complete the equations for each of the following financial statement ratios.

Solvency Ratio$\mathit{Solvency Ratio}$	= $\mathit{ }=\mathit{ }$	Total Net Worth	/ $\mathit{ }\mathit{/}\mathit{ }$	Total Assets
Liquidity Ratio$\mathit{Liquidity Ratio}$	= $\mathit{ }=\mathit{ }$	Total Liquid Assets	/ $\mathit{ }\mathit{/}\mathit{ }$	Total Current Debts
Savings Ratio$\mathit{Savings Ratio}$	= $\mathit{ }=\mathit{ }$	Cash Surplus	/ $\mathit{ }\mathit{/}\mathit{ }$	Income after taxes
Debt Service Ratio$\mathit{Debt Service Ratio}$	= $\mathit{ }=\mathit{ }$	Total Monthly Loan Payments	/ $\mathit{ }\mathit{/}\mathit{ }$	Monthly Gross Income

Brock Newman has prepared his annual financial statements in order to analyze the data. The data provided are items from Brock’s balance sheet and income and expense statement. Use the data provided to calculate Brock’s financial statement ratios. Enter your answers as percentages rounded to two decimal places. For example, .15006 would be entered as "15.01%.”

Brock’s Financial Data
Total liquid assets	$496
Total assets	$9,925
Total current debts	$2,481
Total net worth	$3,474
Total cash surplus	$170.6667
Income after taxes	$1,399
Total monthly loan payments	$307
Monthly gross (before-tax) income	$1,706.6667

Brock’s solvency ratio:	35.00 %
Brock’s liquidity ratio:	20.00 %
Brock’s savings ratio:	12.20 %
Brock’s debt service ratio:	18.00 %