Given the following information from financial statements, what is the debt-to-i

Question

Given the following information from financial statements, what is the debt-to-income ratio and your evaluation of it? Monetary assets $4,060 Tangible assets $35,800 Investment assets $15,005 Short-term liabilities $3,690 Long-term liabilities $27,350 Annual gross income $48,000 Annual take-home income $35,000 Annual expenses (including taxes and debt repayment) $46,800 Annual debt repayment $8,700 O 18% and in the danger zone 25% . adequate income to pay debt O 25% and in the danger zone 18% , adequate income to pay debt

Explanation / Answer

Debt to income ratio = Monthly debt payment ÷ monthly gross income

Debt to income ratio = (8700/12) ÷(48000/12)

Debt to income ratio = 0.18125 or 18.125% rounded 18%

Since Debt to income ratio lower than 36% is good and more chances of financing

So option D is correct 18% - adequate income to pay debt

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