Net worth
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- For the film titled Net Worth, see Net Worth (film).
In business, net worth (sometimes called net liabilities) is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time. In the case of an individual, the term estate is used. That term is used especially in the context of fraudulent law and in relation to probate, on the death of the company.
In personal finance, net worth (or wealth) refers to an individual's net economic position; similarly, it uses the value of all assets (long term assets) minus the value of all liabilities.
Net worth in business is generally based on the value of all assets and liabilities at the carrying value which is the value as expressed on the financial statements. To the extent items on the balance sheet do not express their true (market) value, the net worth will also be inaccurate.
Net worth in this formulation is not an expression of the market value of the firm: the firm may be worth more (or less) if sold as a going concern.
On reading the balance sheet, if the accumulated losses is more than the shareholder's equity, it is a clear case of negative net worth.
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