Sitemap

Net worth definition

Description

Net worth is a measure showing the amount by which the assets exceed debt. Data to calculate this ratio is collected from balance sheet.

This measure is the one that every company owner must know because in other way the uncontrolled amount of debt might lead to bankruptcy.

Norms and limitations

There are no norms and limitations for this measure.

If company’s debt exceeds its assets the bankruptcy is obvious.

Formula

Assets (Total assets) – mean every asset that the company owns and that is shown on the balance sheet. Total assets equals total liabilities + owner’s equity.

Debt (total debt, total liabilities) is calculated adding together long term debt with short term debt. These two measures can be easily located on the balance sheet.