Net Worth Calculator
Net Worth Calculator
Total Assets – Total Liabilities
- Total Assets
- Total Liabilities
Net Worth is a type of calculator wherein one can calculate the value by adding up all the assets and deducting all the liabilities from the same and that shall be a value which is owned by the individual or the entity.
About the Net Worth Calculator
The formula for calculating the Net Worth is per below:
Many of the individuals when asked about the question of what the value of assets is, they own, they only imagine summing up of the value of assets such as checking account, savings and retirement accounts, jewelry, real estate and other property values along with cash in hand.
However, they tend to miss out on the liabilities they own such as outstanding credit card bills, any mortgage loans, monthly rentals, auto loans if any or even student loans. These liabilities need to be subtracted from the value of assets since these represent cash outflow in nearby future or even in the long term if they are mortgage loans wherein duration can range from 10 years to 30 years.
Again, if these are not paid or say the individual defaults on the same, then the assets that were collateralized will be seized by the bank so that they can sell it and recover the amount due from the borrower and hand over the remaining proceeds if any. Therefore, to understand the value of assets owned by one, deducting liabilities is necessary and that is actually the true value owned by the individuals or the firms.
How to Calculate Using Net Worth Calculator?
Below are the steps that need to be followed in order to calculate the net worth of the firm or the individual:
Step #1 – First of finding out whether a net worth is to be calculated for an individual or firm.
Step #2 – If its individual then figures out all the assets that are owned by them which will include real estate, jewelry, checking account, other bank balances and cash in hand.
Step #3 – If its firm then includes all the value of the assets which includes Plant and Machinery, Buildings, its current assets, etc.
Step #5 – For firm, the liabilities would include all long term loans, debt, current liabilities whether they are interest-bearing or not but exclude share capital and reserves as those are owned by the shareholders of the company.
Step #6 – Now deduct the value of liabilities arrived in step 4 and step 5 from the value of assets arrived in step 2 and step 3 respectively which will yield one value of net worth which is owned by them.
Mr. Arora who has stayed in New York for a couple of years and has been well settled over there. He ages 39 years old and has worked hard to create his own assets. He was recently looking for a loan and he informed the bank that his assets base worth is more than $10 mn. However, the bank asked him to submit the details of any loans outstanding and he has furnished below details to the banker along with assets details.:
The bank has the policy to provide a loan 10 times the net worth. You are required to calculate Net Worth based on these figures and the amount of loan he is eligible for.
We are given assets and liabilities details and we shall first take a total of both of them.
Now we can use the below formula to calculate the net worth.
Therefore, the net worth of the firm is 798,068.75
Sodexo is one of the fastest running food coupons company and one of the street analysts is following the firm and he has been tasked with calculating basic ratios and one of them is to calculate the net worth of the firm.
Below is the extract from their balance sheet which will be used to calculate the net worth.
Based on the given information you are required to calculate the Net worth of the firm and comment on whether it has increased or decreased?
Here, we need to calculate the values of assets and liabilities.
We can use below formula to calculate the net worth of the company
The net worth value will be:
As seen from above, the net worth of the firm has decreased.
As seen from above, net worth is an important concept and can be applied to calculate the true value owned by the individual as well as the firm. These are mostly used by financial institutions while granting credit or loan to them, also by shareholders while making huge investments say while acquiring the firm.
This has been a guide to the Net Worth Calculator. Here we discuss how to calculate the net worth to know the true value owned by the individual as well as the firm along with step by step examples. You may also take a look at the following useful articles –