Assume that you were given $100,000 to invest in financial assets. What would your investment portfolio look like? Why? How can you utilize financial ratios in your personal finances? Why is it...

BEHAVIORAL FINANCE
Assume that you were given $100,000 to invest in financial assets. What would your investment portfolio look like? Why?
The ideal portfolio will comprise of both debt and equity so that risk gets diversified and return is optimized. Since debt is a comparatively cheaper source of finance than equity, the inclusion of more debt reduces the overall cost of capital and increases the risk of insolvency in terms of fixed payment of interest. Hence, a trade-off is required for framing the personal portfolio (Gerrans & Heaney, 2016).
How can you utilize financial ratios in your personal finances?
Financial ratios like current ratio, that evaluates the short-term liquidity position, may be referred for knowing the personal assets liability position for short-term. Also, the savings ratio helps the person to evaluate the proportion of monthly gross income that is kept aside for monthly savings on a periodic basis and therefore, assesses the savings propensity of the individual.
Why is it important for you to be aware of your personal financial ratios?
If this personal finance ratio is unknown to the person planning for personal finance in a structured fashion, such objective may not be fulfilled because of a wrong...