What Net Worth Means
Net worth is the difference between total assets and total liabilities. Assets include cash, investments, real estate, and business interests. Liabilities include mortgages, loans, and other debts. The result shows the residual value an individual or entity would have after settling all obligations.
How Assets and Liabilities Are Valued
Professionals typically use market value for liquid assets such as publicly traded securities and real estate. For private businesses, they may apply discounted cash flow analysis, comparable company analysis, or book value adjustments. Valuations rely on recent transactions, appraisals, and financial statements.
Why Net Worth Calculations Vary
Different methods produce different results because of assumptions about growth rates, discount rates, and asset liquidity. Public disclosures, such as SEC filings, often provide conservative estimates. Independent analysts and wealth trackers may use alternative data and modeling techniques.
For detailed guidance on asset valuation standards, see the Investopedia definition of net worth.
