Tuesday, May 19, 2009

Hey guys we have a test tomorrow so make sure you study, study, study :)

Today we learned that that net worth = assets-liabilities.
Assets is money you have or things of value that you own. There are three kinds of assets:
Liquid Assets: Money you can access easily (cash amounts)
Semi-Liquid Assets: Longer term investments (stocks, mutual funds, or some real estate)
Non-Liquid Assets: Material goods (cars, houses) you have to sell it to make money.
Liabilities is amounts of money that you owe. There are two kinds:
Short Term Debts: Must be paid in the next twelve months.
Long Term Debt: Payments that will take more than a year (mortage).

We also learned today that the Debt/Equity Ratio = (Total Liabilities - Mortage) / Net Worth

You want the outcome of the Debt/Equity Ratio to never be bigger than .5 or 50%. If it is even half a percent higher you will have a hard time finding a bank if you can that will give you a loan. But not is all lost, if it is larger than 50% you may try to get a lower loan, find the money in some bond or somewhere else, take a smaller loan then get another after, or even pay off another debtin order to get that percent 50 or lower.

There a few really good examples of this in the slides Mr.K has put up, so if you feel you need more feel free to also look there.

Wish everyone luck on tomorrows test :) and the next scribe is...Lamael


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