21 October 2009
What Does Net Worth Mean? The amount by which assets exceed liabilities. This term can be applied to companies and individuals. Investopedia explains Net Worth For a company, this is known as shareholders' (or owners') equity and is determined by subtracting liabilities on the balance sheet from assets. For example, if a company has $45 million worth of liabilities and $65 million in assets, the company's net worth (shareholders' equity) is $20 million ($65 million - $45 million).
Alternatively, let's say an individual has only three assets, $100,000 of common stock, $30,000 worth of bonds and title to a $190,000 house. Conversely they have only one liability, $150,000 owing on their mortgage. The individual's net worth would be $170,000 ([$100,000 + $30,000 + $190,000] - [$150,000]).
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