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.