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In regards to credit what does capacity mean?
In the context of credit, "capacity" refers to a borrower's ability to repay a loan based on their income, expenses, and existing debt obligations. Lenders assess capacity by evaluating the borrower's debt-to-income ratio, which compares monthly debt payments to gross monthly income. A higher capacity indicates a greater likelihood of repayment, making the borrower a more attractive candidate for credit. Ultimately, it helps lenders determine the amount of credit they are willing to extend.
Why do lenders use gross income instead of net income when determining loan eligibility?
Lenders use gross income instead of net income when determining loan eligibility because gross income provides a more accurate picture of a borrower's overall financial capacity and ability to repay the loan. Net income can be influenced by various deductions and expenses, which may not accurately reflect a borrower's true financial situation. By using gross income, lenders can assess a borrower's income before deductions and get a clearer understanding of their financial stability.
What is the order of steps to make a personal budget A Reduce expenses B Categorize expenses to required versus luxury C Add all income sources D Add all expenses D Are expenses below income?
Total your income.Figure out how much money you are spending.Categorize your expenses to show where your money goes.Determine if your expenses are above or below your income.Reduce expenses in flexible categories to save or increase savings. OR 1. Add up all sources of income 2. Calculate all expenses - this may take several tries because you may forget items 3. Categorize different expenses 4. Determine if expenses are below income 5. Reduce expenses in flexible categories - required vs luxury
how do you calculate Net operating expenses?
Net Operating Expenses (NOE) are calculated by subtracting total operating income from total operating expenses. First, identify all operating income sources, such as rental income or service fees. Then, list all operating expenses, including property management, maintenance, utilities, and taxes. Finally, use the formula: NOE = Total Operating Income - Total Operating Expenses to arrive at the net figure.
What is a plan of income and expenses?
A plan of income and expenses is an approach to building income and paying down expenses. Many people maintain a plan for their income and expenses without realizing it.
What does the D of the 7 V mean?
The "D" in the "7 V" acronym typically stands for "debt." The phrase "7 V" refers to the seven key factors that lenders consider when evaluating a loan application: debt, income, assets, credit score, employment history, loan-to-value ratio, and housing expenses.
Put the steps in the correct order to show how to put together a personal budget Add up all of your sources of income Figure out how much money you're spending Categorize your expenses to?
*total your income *figure out how much money you are spending. *categorize your expenses to show where your money goes. *determine if your expenses are above or below your income. *reduce expenses in flexible categories to save or increase savings
How to prepare a income statement?
Sales - cost of goods sold = gross profit. - operating expenses(i.e marketing expenses and administrative expenses) = operating income. + other income - other expenses = income before tax - tax = net income/profit.
Where does travel go on income statement?
Travel expenses are expenses as all other normal business expenses and as all other business expenses are part of income statement traveling expenses are also part of income statement.
How is a budget is made?
Figure out your income,List your expenses,Categorize your expenses,Determine if expenses are below income, and Reduce expenses in flexible categoris if nessecary.
A budget is used to do which of the following?
Plan income and expenses.
Is audit prepaid expenses entry come in income statement?
Prepaid expenses are not part of income statements, in accrual accounting income and expenses are only shown in income statements when they are actually incurred.
