It is important for the financial advisor to look at both assets and liabilities when advising you on how much money you should keep in your account. The two are usually compared and when the ratio of assets to liabilities is high then it indicates that the balance sheet reflects a bigger liability to equity ratio.
It’s not just about the ratio, but also about the total assets held by an individual. Assets are those that are physically present on land, buildings and other tangible assets. These include stocks, bonds, money, bank accounts, mortgages and any other investments. Liabilities are those that are not physically present on the asset. It could be a loan, mortgage or insurance premium payment.
The ratio of assets to liability is a reflection of how much equity is in your balance sheet. If you own a home and have a mortgage with your lender then the balance sheet will show that you have a mortgage. The mortgage represents the amount of money you owe to your lender and what you can actually borrow from them.
The ratio of liabilities to assets is a more accurate reflection of your financial situation than the ratio of assets to equity. In fact it can be a better indicator because it shows whether or not you are able to pay off your debts. When you own a home and have a mortgage then this debt is secured against the value of your home.
When you are looking at your balance sheet and you notice that there are many assets and none of them is secured against the value of your home then this means that there is some equity left on your balance sheet that you can access. If there is not any left then you have more debt than equity.
You need to have more liability than equity on your balance sheet if you are looking to raise capital. The reason why is because the equity is needed to invest in the business. If you have too much equity you will not be able to access it when you need to. This is because the money you raise will not cover all your costs.
If you are struggling financially then you need to consult with a financial advisor who can advise you on how to get out of debt. A lot of people who are having problems with paying their bills end up declaring bankruptcy. This will wipe out their credit rating so it is always wise to seek advice before this happens.
By following this advice you will be able to ensure that the balance sheet reflects both your assets and liabilities correctly. You will also be able to plan and create a budget for the future. This will help you to save your credit rating and enable you to raise the money you need to pay off your debts.
You will be able to make sure that you follow the guidelines set down by the FSA for the type of equity ratios that you use. If you don’t follow these guidelines then the FSA may have to come in and remove the equity balance that you have used as part of your business structure. You should also ensure that you are using all the equity that you have in the business.
You need to consider your liabilities in order to know whether they are growing or not. If you are facing serious debt problems then you will need to look at the equity and how much cash is left after paying off your debt. If your debt is growing then your cash flow will probably be decreasing. If this is the case then you need to work harder to reduce the debt.
It is possible to take control of your debt by using debt consolidation loans and equity loans. There are also personal loans that you can get that will help you to reduce the debt load on you.
These debt relief services provide you with an online service where you can complete forms and give them to your creditors so that they will know exactly how much you owe them. Once you have the information, they will give you a quote that tells them how much you owe. You then send the quotes back to the company who will negotiate with your creditors on your behalf to reduce the debt.