Wendy Wilson,a successful college graduate,is currently employed in a position paying $49,500 a year.Wendy's annual living expenses are only $42,000 so she has accumulated $7,200 in monetary assets and $27,000 in investment assets since her graduation.Use the liquidity ratio to figure how long Wendy could pay expenses if she were to lose her job.

Question

Quizplus · Accepted Answer

The liquidity ratio is calculated by dividing monetary assets by monthly expenses. Wendy's monthly expenses are $42,000 / 12 = $3,500. Her liquidity ratio is $7,200 / $3,500 ≈ 2.06, meaning she can cover her expenses for about two months.

Wendy Wilson,a Successful College Graduate,is Currently Employed in a Position