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Bitesize and Fast Finance education. What is Net Worth? Has the term ever confused you? Watch to find out!
Net Worth is very popular term these days. Just look at the number hits you get on Google or Youtube when you search for the term. So much so that even I run a live counter for Elon Musk’s net worth in real time. The link for the video is in the description below (sorry for the plug).
Here’s how Investopedia defines the term: “Net worth is the value of the assets a person or corporation owns, minus the liabilities they owe. It is an important metric to gauge a company's health, providing a useful snapshot of its current financial position.”
In Math the equation is Assets – Liabilities = Net Worth. If you are familiar with basic accounting and finance, even remotely, the definition should be ringing some bells for you. Or the definition should sound similar to another Accounting Concept to you. Switch out the term Net Worth with Owner’s Capital or Owner’s Equity and we get Assets – Liability = Owners’ Capital / Owner’s Equity. The equation can be changed to Assets = Liability + Owner’s Capital / Owner’s Equity.
Or in human speak: All the assets owned by you or a company should either be financed using a liability (a loan for example) and/or your own money.
I hope you learnt something new today. Or at the very least, I hope I helped you under what Net Worth means a bit better. Comment on any other topics you would like me to go through.
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This video is for educational purposes only