What is Net worth ?

Definition of Net worth

Definition of Net worth

Net worth is a simple term which states the net assets of a business, individuals Government and other entities. For example,

Asset- Liabilities= Net assets

Assets include cash in hand and bank, investments, car, real estate, home , land , gold and anything of such value.

Brief Explanation of Net worth

Liabilities include debts of all kind and house mortgages, car loans etc.

  • It includes all the financial and non-financial assets.
  • It indicates or measures the worth or financial strength of an individual or business.
  • NW of companies is also known as equity.
  • It is kind of indirectly mentioned on Balance sheet of the company.
  • NW of the company can be increasing if they retain the profit and do not pay dividends.
  • NW of the company is estimated by seeing it’s Balance sheet.
  • This can sometimes be misleading as balance sheet items are mentioned on their carrying value rather than their actual value at that point in time.
  • If liabilities increase the assets then it is said to be negative.
  • Government net worth is calculated the same way as individuals and companies.
  • It includes same items and rules as well.

 

Previous Post
Newer Post