The Lee Case Study Questions
The Lee Case Study Questions
PART ONE--FOUNDATIONS IN FINANCIAL PLANNING
Megan and Kevin Lee--The Newlyweds
Megan and Kevin Lee would like your help in starting their financial plan. Review Megan and Kevin 's financial and personal information before answering the following questions.
1. Using the January 1, 2002 asset and liability information, develop a balance sheet for Megan and Kevin Lee. Assume they have no unpaid bills. What is the Lee 's net worth?
2. Using the income and expenditure information for 2001, complete an income and expenses statement for Megan and Kevin. Use the "cash flow" concept for this financial statement including all money inflows as income and all outflows as expenditures. Did Megan and Kevin have a cash surplus or a cash deficit in 2001? What impact does the 2001 cash surplus (deficit) have on the following year=s (January 1, 2002) balance sheet?
3. Based on Megan and Kevin 's financial statements, calculate the following ratios: 1. Savings ratio 2. Liquidity ratio 3. Solvency ratio 4. Debt service ratio
4. Based on the information in the original case, from Megan and Kevin 's financial statements, and from the ratios, list at least 3 positive and 3 negative aspects of the Lee=s current financial position.
After reading Chapters 1 and 2, you probably realize that Megan and Kevin 's financial goals are not defined well enough in the original case to serve as the basis for their financial plan and cash budget. Upon further review, Megan and Kevin have restated their financial goals in order of priority as follows: 5. Pay off all existing credit card balances within the next 2 years. 6. Have liquid assets equal to 3 month 's net salary within the next 2 years for an emergency fund. 7. Save $10,000 for the purchase of a second car in 3 years. 8. Buy a house within 5 years. Megan and Kevin plan on using the inherited funds that are
PART ONE--FOUNDATIONS IN FINANCIAL PLANNING
Megan and Kevin Lee--The Newlyweds
Megan and Kevin Lee would like your help in starting their financial plan. Review Megan and Kevin 's financial and personal information before answering the following questions.
1. Using the January 1, 2002 asset and liability information, develop a balance sheet for Megan and Kevin Lee. Assume they have no unpaid bills. What is the Lee 's net worth?
2. Using the income and expenditure information for 2001, complete an income and expenses statement for Megan and Kevin. Use the "cash flow" concept for this financial statement including all money inflows as income and all outflows as expenditures. Did Megan and Kevin have a cash surplus or a cash deficit in 2001? What impact does the 2001 cash surplus (deficit) have on the following year=s (January 1, 2002) balance sheet?
3. Based on Megan and Kevin 's financial statements, calculate the following ratios: 1. Savings ratio 2. Liquidity ratio 3. Solvency ratio 4. Debt service ratio
4. Based on the information in the original case, from Megan and Kevin 's financial statements, and from the ratios, list at least 3 positive and 3 negative aspects of the Lee=s current financial position.
After reading Chapters 1 and 2, you probably realize that Megan and Kevin 's financial goals are not defined well enough in the original case to serve as the basis for their financial plan and cash budget. Upon further review, Megan and Kevin have restated their financial goals in order of priority as follows: 5. Pay off all existing credit card balances within the next 2 years. 6. Have liquid assets equal to 3 month 's net salary within the next 2 years for an emergency fund. 7. Save $10,000 for the purchase of a second car in 3 years. 8. Buy a house within 5 years. Megan and Kevin plan on using the inherited funds that are