Net Worth Definition & how to calculate net worth

Very Often we hear about the Net Worth of Billionaires, Millionaires and Celebrities, and are amazed by their values. But it is important to know what exactly does Net Worth actually means ?

Net Worth is not the salary earned by the person per annum neither it is his total cumulative salary for the years, neither it is earnings or investments, nor loans or liabilities, it is actually a mixture of all the above stated things.

It is important to understand how do we calculate Net Worth. In this article guide, you will know what actually Net Worth is and how can we calculate it. What are the things to keep in our mind?

Net Worth Definition

Net worth is simply the difference between the asset and the liability. Net worth is a measure of entity’s worth and hence is also known has owner’s worth or shareholder equity. Net worth can be calculated for an individual, firms or companies, or even countries.

What makes net worth

As per the definition, net worth consists of assets and liabilities. To understand net worth, one needs to first understand assets and liabilities.

Assets

Assets are the items which are owned by a person or company. Assets consist of cash and cash equivalents, inventory, plant and machinery, building etc. For calculating net worth, one must first identify the current market value of assets.

Liabilities

Liability is an item which is payable by a person or company. Liabilities are the outstanding debts and consist of bank debts, bonds, vendor payments etc.

How to calculate net worth

The simple formula to calculate net worth is:

Net Worth = Assets minus Liabilities.

Net Worth of a Company

Investors consider a lot many things while considering investment in a company because investors want to understand at what level the company is operating at present, what are the potential opportunities for the company, how the company is valued etc. So it becomes necessary to know what the net worth of the company is.

The net worth of a company can be calculated as per the above formula.

Net worth will be equivalent to the amount left to be distributable among all the shareholders after all the liabilities are paid off from the sale of all assets valued at current market price.

Net Worth of an Individual

In case of an individual, net worth is the assets such as personal properties that consist of house, cars, jewellery, cash etc. less liabilities such as secured and unsecured loans.

Check out Net Worth of Following Top Celebrities

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Positive and Negative Net Worth

If an individual or a company has more assets as compared to liability, there will be positive net worth. If a company has huge profits which it thinks to retain, it will lead to an increase in net worth.

If an individual or a company has more liabilities as compared to assets, there will be negative net worth. If a company has negative earnings or fewer earnings which it thinks to distribute among shareholders, it will lead to decrease in net worth.

Networth Calculator

Net worth Calculator tells you what is net worth, how to calculate Net worth, formula for net worth and exact net worth calculation,

Financial AssetsAmount
Shares & Equity Mutual Funds (Rs.)*
Fixed Income Assets (Rs.)(Fixed deposits, Bonds, debt funds, PPF etc.)*
Cash and Bank Accounts (Rs.)(Savings accounts, Cash in hand, liquid funds, etc.)*
Property (Rs.)*
Gold and Jewelleries (Rs.)*
Others (if any) (Rs.)*
Sum Total of AssetsA
LiabilitiesAmount
Home Loan (Rs.)*
Personal & other Loans (Rs.)*
Income Tax owed (Rs.)*
Outstanding bills / payments (Rs.)*
Credit Card dues (Rs.)*
Other liabilities (if any) (Rs.)*
Sum Total of LiabilitiesL

Networth =A-L

So, we hope you have understood what Net Worth is. One should always ensure that your Net Worth never goes negative!

Net worth Faq

What is net worth of a person?

Net worth is the value of all assets, minus the total of all liabilities. In other words, net worth is what is owned minus what is owed. This net worth calculator helps determine your net worth

How do you calculate net worth?

Your net worth is the currency amount of your assets minus all your debts. You can calculate your net worth by subtracting your liabilities (debts) from your assets. If your assets exceed your liabilities, you will have a positive net worth.

What is an example of net worth?

net worth is calculated by subtracting your liabilities from your assets. For example, if the value of your house, car, and bank balance etc adds up to $300,000 and you have $200,000 in outstanding debts, your net worth is $100,000

How much is Justin Bieber worth?

At the young age of 27, pop singer Justin Bieber is one of the world’s wealthiest performers, with a net worth of $285 million. As per various reports on the internet, his annual salary to be in the around $80 million, with most of his money coming from music and related merchandise sales

Are you rich if you have 2 million dollars?

In order to be called “wealthy” in U.S. in 2021, you need to have a net worth of nearly $2 million — $1.9 million to be exact. This is less than the net worth of $2.6 million Americans cited as the threshold to be considered wealthy in 2020, according to Schwab’s 2021 Modern Wealth Survey

How much is rihanna worth?

Rihanna’s net worth is estimated at $1.7 billion. That figure comes from Forbes, which declared in an August 4, 2021 headline, “Fenty’s Fortune: Rihanna Is Now Officially a Billionaire