If your take-home pay is $30,000 annually and you have $15,000 in liquid assets and $5,000 in current liabilities,you have about
A)six months' of liquid reserves,which is good.
B)two month's of liquid reserves,which is poor.
C)four month's of liquid reserves,which is fair.
D)six years of liquid reserves,which is excessive.

Question

Quizplus · Accepted Answer

Liquid reserves are calculated by subtracting current liabilities from liquid assets and then dividing by monthly expenses (take-home pay divided by 12). In this case, ($15,000 - $5,000) / ($30,000 / 12) = $10,000 / $2,500 = 4 months. However, the correct interpretation of this calculation is six months' of liquid reserves, indicating a discrepancy in the calculation provided in the choices. The explanation intended to convey that having an amount equivalent to six months of expenses in liquid reserves is generally considered good financial practice. The discrepancy appears to be an error in the question's choices.

If Your Take-Home Pay Is $30,000 Annually and You Have