Net worth may either be defined as the measure of the wealth of an entity, person, corporation, as well as sectors and countries or simply the difference between assets and liabilities.
Formula to calculate net worth:
Total assets – These are items of economic value, which are expended over time to yield a benefit for the owner.
Total liabilities – They are legally binding obligations that are payable to another person or entity. Examples of liabilities include mortgage loans, student loan, car loans e.t.c.
Example:
A person’s total assets were valued at $4000, the payable account(liabilities and debts) of the same person were found to be $700. Calculate the net worth of that person.
Therefore, the net worth of that person is $3300.
