NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
A client's balance sheet shows liquid assets of Rs 3,60,000 and monthly non-discretionary expenses of Rs 45,000 (including EMIs). What is her emergency fund (liquidity) ratio in months?
The liquidity ratio is 8 months. Liquid assets of Rs 3,60,000 divided by monthly non-discretionary expenses of Rs 45,000 equals 8, meaning she can cover essential outgoings, including EMIs, for eight months from liquid resources.
- A6 months
- B10 months
- C8 monthsCorrect
- D7.5 months
Explanation
Liquidity ratio = liquid assets / monthly non-discretionary expenses = 3,60,000 / 45,000 = 8 months. Using 7.5 would need expenses of Rs 48,000, which is not in the data.
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