Rocky owns a $184,000 town house and still has an unpaid mortgage of $149,000. In addition to his mortgage, he has the following liabilities:

Visa	$ 750
MasterCard	370
Discover card	550
Education loan	3,400
Personal bank loan	550
Auto loan	5,900
Total	$ 11,520
Rocky’s net worth (not including his home) is about $38,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property.

What is Rocky’s debt-to-equity ratio?

Note: Round your answer to 2 decimal places.

Has he reached the upper limit of debt obligations?



To calculate Rocky's debt-to-equity ratio, we will use the following formula:

\[
\text{Debt-to-Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Equity}}
\]

**Step 1: Calculate Total Liabilities (excluding the mortgage)**  
The total of Rocky's other liabilities is given as $11,520.

**Step 2: Equity (not including his home)**  
Rocky’s equity (assets) is $38,000.

**Step 3: Calculate the Debt-to-Equity Ratio**
\[
\text{Debt-to-Equity Ratio} = \frac{11,520}{38,000}
\]

Let's calculate this ratio and round to 2 decimal places.Rocky's debt-to-equity ratio is 0.30.

### Has Rocky reached the upper limit of debt obligations?
A debt-to-equity ratio of 0.30 is relatively low, suggesting that Rocky has not reached the upper limit of debt obligations. Typically, a debt-to-equity ratio below 1 is considered manageable, with higher ratios (especially above 2) indicating more significant financial risk. However, personal financial situations may vary, and it is essential for Rocky to assess his own comfort level and future liabilities when evaluating his debt load.

Would you like further details or have any other questions?

Here are 5 related questions to expand on the topic:
1. What is considered a "safe" debt-to-equity ratio for individuals?
2. How does mortgage debt influence the debt-to-equity ratio?
3. What steps can Rocky take to reduce his overall liabilities?
4. How would Rocky's ratio change if he increased his equity or paid off some debts?
5. How does a debt-to-equity ratio impact personal loan applications?

**Tip**: Tracking your debt-to-equity ratio regularly helps in maintaining a healthy financial status and aids in making informed decisions about future borrowing.

Rocky owns a $184,000 town house and still has an unpaid mortgage of $149,000. In addition to his mortgage, he has the following liabilities:

Visa $ 750
MasterCard $370
Discover card $550
Education loan $3,400
Personal bank loan $550
Auto loan $5,900
Total $11,520

Rocky’s net worth (not including his home) is about $38,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property.

What is Rocky’s debt-to-equity ratio?

Has he reached the upper limit of debt obligations?

Learn how to calculate Rocky's debt-to-equity ratio with his total liabilities of $11,520 and equity of $38,000. Understand the concept of debt obligations and financial analysis, with an example that provides a clear step-by-step solution. Suitable for students in Grades 9-12.

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