A calculation of all assets owned by an individual, minus their liabilities, provides a comprehensive snapshot of their financial standing. This figure encompasses a variety of holdings, including real estate, investments, and other valuable possessions. By subtracting debts and other financial obligations, the remaining sum represents the individual’s overall wealth. Understanding this calculation offers valuable insights into an individual’s financial health and stability.
For example, if someone owns a house worth $500,000, a car worth $20,000, and has $50,000 in investments, their total assets are $570,000. If they have a mortgage of $200,000 and student loans of $30,000, their liabilities total $230,000. Subtracting the liabilities from the assets leaves a net worth of $340,000. Another example could involve an entrepreneur with a business valued at $1 million, but with business loans totaling $600,000, resulting in a net worth of $400,000.