Net Worth
Total assets minus total liabilities.
Net worth (also called book value or owner's equity) is the difference between total assets and total liabilities. For a business, it represents the owners' residual claim after all debts are settled. Positive and growing net worth indicates financial strength, while negative net worth (more owed than owned) signals distress. Net worth is a key metric in business valuations and loan applications.
Formula
Net Worth = Total Assets − Total LiabilitiesExample
A business owns $350,000 in assets (equipment, cash, receivables) and owes $200,000 in liabilities (loans, payables)—net worth is $150,000.
Why It Matters for Your Business
Net worth is the clearest single number reflecting your business's financial health, and growing it over time means you're building lasting value.
Related Terms
More Business Terms
Accounts Reconciliation
Ensuring account balances match between different records.
Break-Even Point
The sales volume at which revenue equals costs.
Budget
A financial plan estimating income and expenses.
Financial Forecast
A prediction of future financial performance.
Capital Expenditure
Funds used to acquire or upgrade physical assets.
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