Net worth
From Wikipedia, the free encyclopedia
In business, Net worth (sometimes "net assets") is the total assets minus total liabilities of an individual or a company. For a company, this is called shareholders' equity and may be referred to as book value.
In personal finance, net worth is also used to refer to an individual's net financial position; similarly, it also uses the value of all assets minus the value of all liabilities (debt).
Net worth in business is generally based on the value of all assets and liabilities at the carrying value, that is, the value as expressed on the financial statements. To the extent that 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.
[edit] Criticisms
The disadvantage of this approach, is that the value at which an item is listed, might not be the amount that you receive when you try to sell it.To remedy this problem, assets are sometimes marked to market. This means, that the value that is used for an item is that at which you can sell it in the open market. Using this method net worth will vary, as prices on the open market vary. It is sometimes difficult to find a mark to market for illiquid assets, such as real estate and shares in unlisted companies. The estimate has to be made then based on readily available comparable valuations .
[edit] See also
 |
This economics or finance-related article is a stub. You can help Wikipedia by expanding it. |
