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 figure provides a snapshot of an individual’s overall wealth at a specific point in time. This calculation is often used to assess financial health and stability.
For example, if someone owns a house worth $500,000 and has a mortgage of $200,000, their equity in the house contributes $300,000 to their overall measure. Another example is an individual with a portfolio of stocks and bonds worth $100,000 and a car loan of $20,000. The net value of their investment portfolio, after accounting for the loan, adds $80,000 to their financial standing.