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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients

Caselet: Rohan, 40, has total assets of Rs 1,20,00,000 and total liabilities of Rs 30,00,000. Of the assets, Rs 70,00,000 is his self-occupied house, and he has investment assets of Rs 35,00,000. His annual gross income is Rs 24,00,000 and annual savings are Rs 3,60,000. His net worth after he repays Rs 10,00,000 of liabilities using Rs 10,00,000 from investment assets will be:

Net worth stays at Rs 90,00,000. It is assets of Rs 1.2 crore minus liabilities of Rs 30 lakh. Repaying debt using investment assets reduces assets and liabilities equally, so the difference is unchanged; only the balance sheet size shrinks.

  1. ARs 80,00,000
  2. BRs 1,00,00,000
  3. CRs 90,00,000Correct
  4. DRs 70,00,000

Explanation

Current net worth = 1,20,00,000 - 30,00,000 = Rs 90,00,000. Using Rs 10,00,000 of assets to repay Rs 10,00,000 of liabilities lowers both by the same amount, so net worth is unchanged at Rs 90,00,000. Subtracting the repayment again gives the wrong Rs 80,00,000.

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