Net Worth Definition

Short Definition:
Net worth of a business is calculated by deducting all debt owed by the business from all assets owned by the business. It is usually based on the life of the business instead of a specific period of time such as a month.

Expanded Definition:
The best way to determine the value of a business is to figure out the net worth.  This calculation compares the amount of accumulated assets (cash, accounts receivable, inventory, equipment) of a business to the total liabilities (accounts payable, loans due, payroll taxes). The result is referred to as net worth and is reported on a financial report called a Balance Sheet.

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