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Net Worth

Total value of an individual's or entity's assets minus their liabilities.

Business Glossary provided by


Net Worth measures the total assets a person or organization possesses after subtracting all debts and liabilities. It represents financial health and economic status, providing a clear snapshot of financial stability and capability.

Context of Use:

This term is widely used in personal finance, business finance, and economics. It helps individuals assess their personal financial condition, while businesses and financial advisors use it to evaluate a company's or individual’s financial strength and potential for investment.


Calculating net worth is essential for financial planning and management. It assists in making informed decisions about budgeting, investing, and borrowing, and is crucial for long-term strategic financial planning.


  • Individuals: A person calculates their net worth to understand their financial standing, which is critical when applying for loans or planning for retirement.

  • Businesses: A company might assess its net worth to attract investors or evaluate its ability to expand its operations.

Related Terms:

  • Assets: Resources with economic value owned by an individual or corporation expected to provide future benefits.

  • Liabilities: Financial debts or obligations that arise during business operations.

  • Equity: The ownership value in an asset after deducting liabilities.


  1. How do you calculate net worth?

    A: Subtract total liabilities from total assets. The result is the net worth.

  2. Why is it important to know your net worth?

    A: Knowing your net worth helps track financial progress, plan for the future, and make informed financial decisions.

  3. Can net worth be negative?

    A: Yes, if total liabilities exceed total assets, the net worth becomes negative, indicating financial distress.

  4. How often should net worth be calculated?

    A: It's advisable to calculate net worth annually to monitor and adjust financial plans effectively.

  5. What factors can affect net worth?

    A: Changes in the value of assets, repayment of debts, and acquisition of new liabilities can all impact net worth.

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