Utilizing the Following Information, Calculate the Housing Expense Ratio

question 7

Multiple Choice

Utilizing the following information, calculate the housing expense ratio. Monthly Principal and interest on mortgage loan: $635; Monthly Tax and insurance payments into escrow: $125; Gross monthly income: $2,500

• A) 25.4%
• B) 30.4%
• C) 44.4%
• D) 53.2%

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Definitions:

Financing Activities

Financing activities are transactions involving obtaining or repaying capital, including issuing equity, borrowing loans, and paying dividends.

Investing Activities

Financial transactions that relate to the acquisition or sale of assets, investments, and other long-term items that are not part of the company's primary operations.

Amortization

The process of gradually reducing the cost of an intangible asset through scheduled charges to expense over its useful life.

Indirect Method

A technique used in cash flow statement preparation that adjusts net income for changes in non-cash accounts to calculate cash flow from operating activities.