Net Worth
The difference between total assets and total liabilities, representing the residual interest in assets after deducting obligations, also called equity.
Net Worth
The residual interest in an entity’s assets after deducting liabilities, representing the owner’s equity in a business or an individual’s personal financial position.
For example, a business with $500,000 in assets and $300,000 in liabilities would have a net worth of $200,000, representing the owners’ residual claim on assets after satisfying all obligations.
For businesses, net worth appears as shareholders’ equity or owner’s equity on the balance sheet. For individuals, it represents personal financial health, comprising assets like homes, investments, and cash, minus liabilities such as mortgages and loans. Positive net worth indicates financial stability, while negative net worth suggests financial distress.