By definition, net worth is basically the value of the assets either a person or corporation owns. But this is minus the liability they owe. Liability is different from net worth, in contrast, liabilities are the assets that a person or corporation have borrowed or owe. Meanwhile, assets are things that a person or a corporation owns. It is an essential measure of a company’s health, offering a useful snapshot of its present financial position. Sometimes called net wealth or net worth, one’s net worth refers to the total value of assets owned minus liabilities owed.
In the United States, the Federal Reserve Board publishes an annual report on household net worth. this is calculated by subtracting the sum of outstanding mortgages, automobile loans, credit card debt, student loan debt. Home equity lines of credit from the total value of all assets in the household also covers. Net worth is calculated as the difference between total assets and total liabilities. Assets include cash, investments, property, vehicles, and any other items that are sellable or convertible into cash. Liabilities include debts, such as credit cards, home equity lines of credit, car payments, and student loan debt.
The definition of net worth could be either positive or negative; with the former meaning that an individual’s assets exceed his/her liabilities. The latter meaning that an individual’s liabilities exceed his/her assets. A positive and increasing net worth indicates a healthy financial situation. A decreasing net worth, however, could somehow indicate a decline in an individual’s financial status. The best way to increase your net worth is to either decrease your liabilities while increasing your assets, or vice versa. You may also wish to consider increasing your assets while decreasing your liabilities.
