A calculation of an individual’s total assets minus their total liabilities provides a snapshot of their financial standing. This calculation considers tangible assets like real estate and investments, as well as less tangible assets like intellectual property or brand recognition. Liabilities, such as mortgages, loans, and outstanding debts, are subtracted from the total assets to arrive at the final figure. Understanding this calculation can offer insights into an individual’s financial health and potential for future growth.
For example, if someone owns a house worth $500,000 and has $100,000 in investments, their total assets would be $600,000. If they also have a mortgage of $200,000 and a car loan of $20,000, their total liabilities would be $220,000. Subtracting the liabilities from the assets results in a net worth of $380,000. Similarly, a business owner might assess their company’s net worth to determine its overall financial strength.