Finance Dictionary
Net Worth
Definition
The total assets minus total liabilities of an individual or a company.
Deep Dive
Net worth is a fundamental measure of financial health for both individuals and companies, representing the total value of all assets owned minus all liabilities (debts) owed. For individuals, assets can include cash, investments, real estate, and valuable possessions, while liabilities encompass mortgages, loans, and credit card debt. For businesses, net worth typically translates to shareholder equity or owner's equity on the balance sheet, indicating the capital invested by owners and retained earnings.
Examples & Use Cases
- 1An individual calculating their net worth by summing the value of their home, retirement accounts, and savings, then subtracting their outstanding mortgage, car loan, and credit card balances
- 2A company's balance sheet showing its shareholder equity as a positive net worth, indicating strong financial reserves
- 3A startup showing a negative net worth in its early years due to significant accumulated debt and limited assets.
Related Terms
AssetsLiabilitiesBalance SheetShareholder EquitySolvencyFinancial Health