A measure of someone’s financial standing represents the total value of their assets minus their liabilities. Assets can include things like real estate, investments, and personal property, while liabilities consist of debts like mortgages and loans. Calculating this measure provides a snapshot of an individual’s financial health at a specific point in time. Understanding this calculation can be crucial for financial planning and decision-making.
For example, a business owner might assess their company’s value or an individual might calculate their own financial worth before making a large purchase like a house. This process involves listing all assets and liabilities and then finding the difference. Regularly evaluating this measure allows individuals and businesses to track their financial progress and make informed choices.