Net Worth Formula
Net Worth = Total Assets – Total Liabilities
Understand the Component of Net Worth
1. Assets: Everything the company owns that has monetary value. This includes:
- Tangible Assets: Cash, inventory, equipment, real estate, etc.
- Intangible Assets: Patents, copyrights, trademarks, brand recognition, etc.
2. Liabilities: What the company owes to others. This includes:
- Current Liabilities: Short-term debts due within a year, like accounts payable and short-term loans.
- Long-Term Liabilities: Debts due in more than a year, like bonds payable and mortgages.
How to Calculate Net Worth of a Company?
Net worth is a financial metric that shows the overall value of a company after all its debts and liabilities are paid off. Think of it like a company’s financial report card – it reveals its financial health and equity. Investors, creditors, and business owners alike use net worth to assess a company’s worth, assets, and liabilities.
Table of Content
- Why Net Worth Matters?
- Net Worth Formula
- How to Calculate Net Worth of a Company?
- How to Calculate Net Worth for a Retail Company?
- Market Value vs. Book Value