Question

Liam and Marta live in London. Both are teachers, with Liam in full time and Martart-time paid employment. When they bought a flat together in June 2018 the mortgage broker talked them through repayment and interest-only mortgages. They decided to use their savings as a deposit and chose a repayment mortgage, which by June 2020 was standing at £100,000. The market value of their flat had increased by 10% over this time period on the original purchasing price of £110,000.

Together, in June 2020 the couple earn a net monthly income of £4000 and their expenditure has averaged £4200 a month over the last two years. In June 2020 their car loan is down from £4,000 to £2,500, their current account balance has dropped to zero and they have an overdraft on their current account of £1500. Meanwhile their savings account holds just £300. They also owe £3000 on a credit card. The rest of their balance sheet has not changed since June 2018.  

They are reviewing their finances as they are considering improving their home by installing a new kitchen.

Table 1 shows their balance sheet and financial ratios in June 2018.

Table 1 Liam and Marta’s household balance sheet – June 2018

	June 2018
Assets	113,120
Liquid assets	3,120
Cash	120
Current account	2,000
Instant access savings account(s)	1,000
Other liquid assets	0
Other assets	110,000
Home	110,000
Liabilities	110,000
Short-term liabilities	1,000
Overdraft	0
Credit card	1,000
Other short-term liabilities	0
Other liabilities	109,000
Personal loans	4,000
Mortgage	105,000
Ratios
Net worth / wealth	3,120
Current asset ratio	3.12
Leverage ratio	97.24

 Using the information provided in Table 1, complete the couple’s balance sheet for June 2020.

Answer 1

	Jun-18	Jun-20	Remarks
Assets	113,120	121,420
Liquid assets	3,120	420
Cash	120	120	Same
Current account	2,000	0	Zero
Instant access savings account(s)	1,000	300	Decreased
Other liquid assets	0	0
Other assets	110,000	121,000
Home	110,000	121,000	10% increase in Market Value
Liabilities	110,000	107,000
Short-term liabilities	1,000	4,500
Overdraft	0	1,500	Overdrawn 1500
Credit card	1,000	3,000	Owe 3000
Other short-term liabilities	0	0
Other liabilities	109,000	102,500
Personal loans	4,000	2,500	Reduced to 2500
Mortgage	105,000	100,000	Reduced to 10000
Net worth
Net worth / wealth	3,120	14,420

Note:- All the information as per the question has been updated while preparing the balance sheet of June - 2020.No information is given about cash,hence the same has been kept at the same level.