George and Betty, a middle-aged couple, have watched their savings account dwindle over the years. They both make good incomes and can't understand why they aren't saving more each month. Below is their financial information to complete an income statement.
Gross monthly income: $8,000
Income taxes withheld monthly: $2,300
Monthly interest income from investments: $100
Monthly insurance payments: $700
Monthly housing expenses: $4,500
Monthly food expenses: $800
Miscellaneous expenses: $400
-What is their current savings ratio?

Question

Quizplus · Accepted Answer

To calculate the savings ratio, we need to subtract the total expenses from the gross income and divide the result by the gross income. 
Total expenses = income taxes + insurance + housing + food + miscellaneous = $2300 + $700 + $4500 + $800 + $400 = $8700
Savings = Gross income - Total expenses = $8000 - $8700 = -$700
Savings ratio = (Savings / Gross income) x 100%
Savings ratio = (-$700 / $8000) x 100% = -8.75%, which is a negative savings ratio. Therefore, the best choice is B.

George and Betty, a Middle-Aged Couple, Have Watched Their Savings