What is your net worth?

 Most of us should have seen millionaire's net worths. But have you ever wondered what that means and how do they calculate it? In this article, we will see what exactly net worth is.

Talking about net worth, we all have to be clear about the term "balance sheet". 

Balance sheet:

A balance sheet is a financial statement with which a person's or an organization's worth is calculated. 

Preparing a balance sheet for yourself is very easy, you can even prepare it by yourself.

i.e: Net worth = Assets -liabilities or if you are calculating a balance sheet for a company ( Assets = liabilities + equities )

Assets - Assets consists of all the properties, your income payments that are bending, all the things you own and use, etc

liabilities - These are payments you owe to others, loans and dues of yours, etc.

Equity - These are the stocks or shares of a company or property.

After adding the current real-estate values of all the properties you own and your cash details, after subtracting all the debts you owe, then the remaining value is your net worth.

                                

This is a sample of a simple balance sheet for a business.

For a company, a proper balance sheet has to be prepared to find out the company's financial performance. The assets of the company have to be equal to the sum of liabilities and equities. Getting to know your personal financial status or your company's financial status will definitely help you to improve the financial performance of both.

Note: All the details given above are in an unprofessional manner and some information seems to be incorrect in view of accountancy but it is written in these easy terms for easy understanding of the readers.

Have a great day :)