What Is Net Worth?
Net worth is the difference between what a company owns and what it owes. It equals total assets minus total liabilities. A positive result means the company has more assets than debts, while a negative result indicates the opposite. Investors and analysts use this figure to gauge financial health.
Key Components
Start with the balance sheet, which lists assets, liabilities, and shareholders' equity. Assets include cash, accounts receivable, inventory, and property. Liabilities include loans, accounts payable, and accrued expenses. Shareholders' equity represents the owners' residual claim after subtracting liabilities from assets.
How to Calculate
Add all current and non-current assets, then subtract all current and non-current liabilities. The result is the company's net worth, also called book value. You can verify the calculation using the accounting equation: Assets = Liabilities + Equity. For more details, see Investopedia's net worth guide.
