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What Is Net Worth?

Views 23782022.12.09
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Key Takeaways

● Net worth is the true wealth of a business or individual.

● Net worth is the value of total assets minus total liabilities.

● Analyzing changes in the net worth of an investment target is necessary before investing.

Understanding

For an individual or a business, net worth is the value of all their assets minus all their liabilities, showing how much they own.

Net worth is an indicator of the financial position of an individual or business.

Calculation

Assets = Liabilities + Owner's Equity

Assets - Liabilities = Owner's Equity

Net worth is the value of a company or an individual's equity.

For example, Company A's assets include a factory building worth $1 million, a car worth $10,000, and 10 pieces of office equipment worth $1,000.

All of its liabilities are bank loans of $800,000.

Thus, Company A's net worth is $211,000.

Net worth can be either positive or negative.

If the total debts of a company or individual are more than the total assets, its net worth will be negative.

Summary

Net worth is a critical way of knowing a person's or company's true wealth. Looking only at the assets may be misleading.

Therefore, investors need to focus on the net worth of an investment target and gauge the future business performance with changes in its assets and liabilities.

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This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose of the above content.

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