Tutor profile: Ben P.
Subject: Personal Finance
How do you calculate the emergency ratio?
First, you need to find what your liquid cash is and then find what your monthly expenses are. The liquid assets are those that are within the balance sheet that are tax -free acounts or cash accounts and monthly expenses can be found within the Income Statement. With regards to the monthly expenses, you should only sum those expenses that are needed to be paid in order to survive. This then gives you the ability to find your emergency ratio which will tell you how many months you are able to live on without having any sort of income.
What is an LBO?
An LBO is a leverage buy out which is typically used when buying a company. It involves the buyer having to take out two loans from two different banks. One loan uses the amortization method in having fixed payments for a certain amount of years while the other loan has huge payments for a very small amount of years. Both of these loans are used to buy out the stockholders of a company which then makes it a buy out. If the buyer doesn't meet the stockholders contract terms, then the buyer will have to give back the stockholders stocks and the stockholders are allowed to keep the money they have earned till this point.