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    2.1.3 Key Metrics Used To Measure Financial Health

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    sakshisingh57624
    This document discusses key metrics used to measure financial health. It outlines five important metrics: 1) net worth, which is assets minus liabilities; 2) emergency fund, which should be 3-6 months of living expenses; 3) credit score, which indicates responsibility with debt; 4) retirement savings, which is essential for a secure later life; and 5) debt-to-income ratio, which should be low to leave income available rather than spent on debt. Understanding these metrics can help with personal financial planning, investment banking, fiscal and monetary policy formulation, and risk management through credit analysis.

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    2.1.3 Key Metrics Used To Measure Financial Health

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    sakshisingh57624
    12 views13 pages
    This document discusses key metrics used to measure financial health. It outlines five important metrics: 1) net worth, which is assets minus liabilities; 2) emergency fund, which should be 3-6 months of living expenses; 3) credit score, which indicates responsibility with debt; 4) retirement savings, which is essential for a secure later life; and 5) debt-to-income ratio, which should be low to leave income available rather than spent on debt. Understanding these metrics can help with personal financial planning, investment banking, fiscal and monetary policy formulation, and risk management through credit analysis.

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    2.1.3 Key Metrics Used to Measure Financial Health

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    This document discusses key metrics used to measure financial health. It outlines five important metrics: 1) net worth, which is assets minus liabilities; 2) emergency fund, which should be 3-6 months of living expenses; 3) credit score, which indicates responsibility with debt; 4) retirement savings, which is essential for a secure later life; and 5) debt-to-income ratio, which should be low to leave income available rather than spent on debt. Understanding these metrics can help with personal financial planning, investment banking, fiscal and monetary policy formulation, and risk management through credit analysis.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    12 views13 pages

    2.1.3 Key Metrics Used To Measure Financial Health

    Uploaded by

    sakshisingh57624
    This document discusses key metrics used to measure financial health. It outlines five important metrics: 1) net worth, which is assets minus liabilities; 2) emergency fund, which should be 3-6 months of living expenses; 3) credit score, which indicates responsibility with debt; 4) retirement savings, which is essential for a secure later life; and 5) debt-to-income ratio, which should be low to leave income available rather than spent on debt. Understanding these metrics can help with personal financial planning, investment banking, fiscal and monetary policy formulation, and risk management through credit analysis.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Subject Code

    22BAT-265
    Behavioral & Personal Finance
    (BBA-Semester IV)
    Topic:-Key Metrics Used To Measure Financial Health

    Faculty Name-Vivek Sharma(E13500)

    DISCOVER . LEARN . EMPOWER


    Course Objectives
    1. To understand the behavioral aspects of financial decision-making and personal
    finance planning.

    2. To create awareness regarding the theoretical, mathematical, and empirical


    underpinnings of anomalies and biases that investors face in financial markets.
    Key Metrics Used To
    Measure Financial Health
    Covered Course Outcome

    Co Title Level
    No
    To identify the techniques which are relevant to
    CO3 traditional financial advisory services and Analyze
    products in the fintech domain.

    3
    Learning
    Outcomes

    1. Key Metrics Used To Measure Financial


    Health
    Key Metrics Used To Measure Financial Health

    1&2 3&4 5
    Your Net Your Credit
    Worth Score
    Your Debt To
    Income
    Your Your Ratio
    Emergency Retirement
    Fund Savings
    I. Your Net Worth

    • Net worth is simply the sum of your assets minus the sum of your
    liabilities. If you’re making good choices when it comes to your
    finances, like saving, paying down debt, and sticking to your investment
    plan, your net worth will improve.
    • This simple truth is why net worth is such an important measure of your
    overall financial health.
    • If you don’t know your net worth, there’s a simple way to calculate it
    and improve it over time.
    II. Your Emergency Fund

    • An emergency fund is just that—a way to cover unexpected


    financial setbacks, such as a sudden job loss, a medical bill that
    isn’t covered by insurance, or an unexpected home repair.
    • It’s generally advised to have at least three to six months of
    living expenses set aside to cover these types of events. If
    you’re self-employed or your income is less predictable, you
    may want to have an even larger cash reserve set aside.
    III Your Credit Score
    • Your credit score is one of the most powerful financial tools you have
    available to you. A strong credit score can save you a substantial amount
    of money over your lifetime. On the other hand, a weak credit score can
    make anything from getting a credit card to buying a house challenging
    and expensive.
    • As a measure of your financial health, your credit score indicates how
    responsible you are with repaying and managing debts. It also determines
    how likely you are to qualify for a loan under the best terms.
    IV. Your Retirement Savings
    • Your retirement savings is an important metric of your
    financial health if you plan to stop working someday.
    • As lifespans and healthcare expenses increase, having
    sufficient financial resources later in life is essential.
    V. Your Debt-To-Income Ratio
    • Your debt-to-income ratio reveals how much of your monthly
    income goes towards paying off debt. This includes good and bad
    debt—for example, mortgage payments, student loans, and credit
    card debt. In general, the lower your debt-to-income ratio, the better
    your financial health.
    • Debt-to-income becomes increasingly important as you near
    retirement since you’ll need all available financial resources to
    support your lifestyle after you stop working. To get your debt-to-
    income ratio to a healthy level, make sure you’re diligent about
    paying down unnecessary debt.
    Application

    • The concepts discussed in this unit will help in the


    following:-
    • Field of Investment Banking
    • Personal Financial Planning
    • Area of Formulating Fiscal and Monetary Policies
    • In the area of Risk Management by doing credit analysis
    Reference Material

    Textbooks:-
    1. Behavioral Finance, William Forbes, Wiley, 2009.
    2. Behavioral Finance: Psychology, Decision-Making and Markets, L. F. Ackert and R. Deaves, South-WesternCol
    Reference Books
    3. Investor Behavior: The Psychology of Financial Planning and Investing, H K Baker and V Ricciardi, Wiley, 2018.
    4. Personal Finance (11th ed.), Jack Kapoor, Les Dlabay and R. J. Hughes, McGraw Hill

    Weblinks

    https://benchmarkwealthmgmt.com/6-metrics-to-assess-your-financial-health/
    https://www.ally.com/stories/save/how-to-measure-your-personal-financial-health/
    THANK YOU

    For any queries


    Kindly E-mail
    vivek.e13500@cumail.in

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