Net Worth is the tool by which you could find out exactly your financial well being. And this is no rocket science but an important tool that everyone should adopt to find out if they are financially healthy or in a mess!
Just as the balance sheet provides a companies standing at a particular point of time, your personal Net Worth tells you about your assets and liabilities and thus tells you more about your financial standing. To add to it you can do some ratio analysis and get a more wider picture of your current financial position.
Personal Net worth = Total Assets – Total Liabilities
Example of Assets owned by you are – House, Investment in Stocks/MF/PPF/FD etc., Car, etc.
Example of Liabilities are current debt, loans, payments o/s, etc.
Present value of the assets and the liabilities are to be taken into consideration.
What does your Net Worth Determine?
Now you are ready to use the simple formula to find out your net worth. Just add up the market values of all your assets and subtract the total liabilities from it. The figure that you arrive at is your net worth! In other words this figure is your real worth, your exact financial position!
It helps you out in personal finance ratio analysis.
Use this tool to find out your net worth.
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