NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
Rohan has liquid assets (savings bank balance and liquid fund units) of Rs 3,60,000. His non-discretionary monthly expenses, including EMIs, are Rs 60,000. What is his liquidity ratio (liquid assets to monthly non-discretionary expenses)?
The liquidity ratio is Rs 3,60,000 divided by Rs 60,000, which equals 6 months. It means Rohan's liquid assets can cover six months of non-discretionary expenses, a commonly used benchmark for an adequate emergency fund.
- A0.6 months
- B6 monthsCorrect
- C12 months
- D5 months
Explanation
Liquidity ratio = liquid assets / monthly non-discretionary expenses = 3,60,000 / 60,000 = 6 months. Check: 6 x 60,000 = 3,60,000. Inverting the fraction gives 0.167, and 0.6 results from a decimal-place slip.
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