Reena wants to put together a net worth statement to share with her bank as she applies for a small loan. Showing your work for each step, construct a net worth statement based on the information she has gathered in the table. What does this mean for Reena’s chances of getting a loan

Answer 1

In order to construct a net worth statement for Reena, we need to calculate her total assets and total liabilities. The net worth statement formula is as follows:

Net Worth = Total Assets - Total Liabilities

Step 1: List Assets

We will first list all of Reena’s assets and their respective values. Assume we have the following based on her information:

| Asset Description | Value ($) | |-------------------------|-----------| | Cash in Bank | 5,000 | | Savings Account | 10,000 | | Car (Market Value) | 15,000 | | House (Market Value) | 200,000 | | Investments | 20,000 |

Total Assets Calculation:

To find the total assets, add all asset values together:

\[ \text{Total Assets} = 5,000 + 10,000 + 15,000 + 200,000 + 20,000 \]

\[ \text{Total Assets} = 250,000 \]

Step 2: List Liabilities

Next, we will list all of Reena’s liabilities and their respective values. Assume we have the following information:

| Liability Description | Value ($) | |---------------------------|-----------| | Mortgage on House | 150,000 | | Car Loan | 5,000 | | Credit Card Debt | 2,000 | | Personal Loan | 8,000 |

Total Liabilities Calculation:

To find total liabilities, add all liability values together:

\[ \text{Total Liabilities} = 150,000 + 5,000 + 2,000 + 8,000 \]

\[ \text{Total Liabilities} = 165,000 \]

Step 3: Calculate Net Worth

Now that we have the total assets and total liabilities, we can calculate Reena’s net worth.

\[ \text{Net Worth} = \text{Total Assets} - \text{Total Liabilities} \]

\[ \text{Net Worth} = 250,000 - 165,000 \]

\[ \text{Net Worth} = 85,000 \]

Conclusion: Net Worth Statement

Based on the calculations, Reena's net worth statement can be summarized as follows:

Net Worth Statement for Reena

• Total Assets: $250,000
• Total Liabilities: $165,000
• Net Worth: $85,000

Implications for Loan Application:

• A net worth of $85,000 indicates that Reena has more assets than liabilities, which is a positive sign to lenders.
• Lenders typically look favorably at applicants with a positive net worth as it suggests financial stability and capacity to repay loans.
• With a strong net worth, Reena may have a good chance of getting the loan she is applying for.

In summary, Reena's positive net worth reflects well on her financial situation, enhancing her chances of securing the loan.