Question

The Roth family has liquid assets of $10,000, use assets of $150,000 and investment assets of $34,000. They also have liabilities totaling $108,000. If their total liabilities increase by $7,000 over the next year, by how much would the Roth family need to increase their assets in order to have a net worth of $100,000?
a.
$7,000
b.
$14,000
c.
$21,000
d.
$28,000

Answer 1

Current assets = 10,000 + 150,000 + 34,000 = 194,000.
After liabilities rise to 108,000 + 7,000 = 115,000, to have net worth 100,000 you need assets = 100,000 + 115,000 = 215,000.
Increase required = 215,000 - 194,000 = 21,000.

Answer: c. $21,000