In business, net worth (sometimes called net assets) 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 in relation to deceased individuals in probate. For businesses, the term is used in the context of fraudulent law and on the dissolution 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 exceed the shareholder's equity, it is a negative value for net worth.
Famous quotes containing the words net and/or worth:
“There is a potential 4-6 percentage point net gain for the President [George Bush] by replacing Dan Quayle on the ticket with someone of neutral stature.”
—Mary Matalin, U.S. Republican political advisor, author, and James Carville b. 1946, U.S. Democratic political advisor, author. All’s Fair: Love, War, and Running for President, p. 205, Random House (1994)
“Living by basic good-mothering guidelines enables a mom to blend the responsibilities of parenthood with its joys; to know when to stand her ground and when to be flexible; and to absorb the lessons of the parenting gurus while also trusting her inner voice when it reasons that another cookie isn’t worth fighting over, or that her child won’t suffer irreparable trauma if, once in a while, Mom puts her own needs first.”
—Sue Woodman (20th century)