Net worth is nothing but the difference between assets and liabilities of a business. Positive net worth means that assets are more than the liabilities, while negative net worth describes the opposite.
Understanding Net Worth
So, if a business has liabilities in excess to what is owned, then the business's health is bad.
- The best way to improve the net worth is to either decrease liabilities while assets either stay constant or increase.
- Net worth can be calculated for individuals, businesses, companies, sectors, and even countries.
- In the context of business, net worth is also known as book value or shareholders' equity.
- Individuals with a substantial net worth are known as high net worth individuals (HNWI).