Answer

Requirement No. 01

Statement of Net Worth

Agravals
       
Assets   Liabilities  

Cash on Hand 175 House mortgage balance 180,000

Bank account balance 950 Car Loan on Sabrina's car 12,500

Term deposit 5,000 Bills Outstanding:  
Canada savings bond 1,800 Telephone 35
House 250,000 Hydro 95
Abbas old car 3,000 Visa 2,816

Sabrina car 15,000 Mastercard 150

Personal assets 20,000 Insurance 2,220
Abbas RRSP (In Term Deposit) 3,000 Interest free loan 25,000
Sabrina RRSP (In a stock mutual fund) 6,000 Total Liabilities: 222,816
    Net Worth 82,109
Total Assets 304,925 Total Liabilites & Net Worth 304,925
       
Net Worth = Total Assets - Total Liabilities
Net Worth = 304,925 - 222,816
Net Worth = 82,109

Monthly Cash flow Statement

 Agravals
Cash Inflows    

Abbas & Sabrina's salary (Take home) 5,650  

     
Cash Outflows    
     

Groceries 800  

Gas and Auto expense 180  

Daycare/ Nursery 600  

Utilities 350  

Newspaper and Megazine 50  

Alcohol and cigarettes 100  

Entertainment 300  

Clothes 200  

Miscellaneous 200  

Monthly mortgage payment 1,292  

Monthly car loan payment 403  

Visa Minimum Due 83  

Mastercard Minimum Due 10  

Monthly taxes 150 Considering the payment as annual(1800/12)

Monthly House Insurance 38 Considering the payment as annual(450/12)

Month wise calculation of annual
vacation expenses 167 Dividing annual expenses into months

Total Outflows 4,922  

     
Total Cashflow 728  

Requirement No. 02
Comments on Statement of Net Worth:

1. Recommendations:

Debt management:
i. Personal debt that is 73% of the total asset is too much above the desired 20% as the
rule of thumb.
a. Car loan of Sabrina’s car can be paid off by selling some of the personal assets
b. Secondly some outstanding amount on cards can be paid off with the cash on hand and
bank account balance
ii. Credit card dues must be paid when they are due to avoid interest rates.
iii. Abbas and Sabrina can utilize single car, they may sell one of the cars and utilize that money to
pay off some debts
iv. Term deposits should be converted into cash equivalents so that they may be utilized in the time
of need.
v. Interest free loan, car loan and some of the dues on Cards are due to the financial
mismanagement of Agravals

Comments on Cash flow statement:

Personal financial planning:

i. Monthly budgeting is the first step towards the successful financial planning, therefore, Agravals
should do budgeting.
ii. They should stop using credit cards. And make purchases through cash to live within means.
iii. If they sell one of the cars, they can save money the pay for car loans.
iv. They can avoid expenses on alcohol and cigarettes which may increase their health expenses in
future.
v. The entertainment expenses exclude newspapers, magazines and annual vacation expenditures,
it means they are extravagant in their spending on entertainment. If they plan they can avoid
these expenses.

Requirement No. 03:

 Statement of net worth (Revised)
Agravals
       
Assets   Liabilities  
Cash on Hand 186 House mortgage balance 164,496
Bank account balance 1,007 Car Loan on Sabrina's car 7,664
Term deposit 5,300 Bills Outstanding:  
Canada savings bond 1,908 Telephone 35
House 265,000 Hydro 95
Abbas old car 3,000 Visa 2,816
Sabrina car 15,000 Mastercard 150
Personal assets 20,000 Insurance 2,220
Abbas RRSP (In Term Deposit) 3,180 Interest free loan 18,000
Sabrina RRSP (In a stock mutual fund) 6,360 Total Liabilities: 195,476
    Net Worth 125,465
Total Assets 320,941 Total Liabilites & Net Worth 320,941
       
Net Worth = Total Assets - Total Liabilities
Net Worth = 320,941- 195,476
Net Worth = 125,465

Note: Considering 6% increase in assets (excluding personal assets and the cars), decrease in the house
mortgage balance, car loan on Sabrin’s car and interest free loan and keeping constant other liabilities, above
statement of Net Worth has been prepared.