1: net worth definition
2: how is net worth calculated
3: net worth vs net price
4: example of net worth
Quick pick
Net worth refers to the value of the company. Its value is determined after subtracting all liabilities and debts from company assets.
Opening information:
Net worth breaks into two words net and worth. Net means catching things of any things which is wire or rope. Which has complex holes wires or ropes to catch and for fishing.
Worth means the value of something. Net worth means the value of certain things or Matters and the value is determined by how much the things are valued in the market.
Say you’re catching a fish in the ocean, you put a rope of complex wire to catch fish. The rope of complex wire is a net and the fish that are caught or contained by the wire rope are a value. So the fish value is the net value, the values are called worth. So it would Called net worth.
this article contains information about what is net worth in the stock market, how net worth is calculated, the distinction between net worth vs net price, and finally example of net worth.
1: net worth definition
Before the stock market, most people considered the net worth in different ways and understood the net worth in the wrong ways.
This makes it very difficult to understand and know one person’s net worth at a time.
Some people calculate and say the net worth would be the monthly income of one person or the yearly income of one person.
Even some people consider that when someone earned millions of dollars over the past ten years means he or she would have a million dollars net worth.
But when the stock market exists, the net worth is determined in only one way, by finding the value of certain things.
When net worth is calculated by only one thing other myths become gone.
For individuals, the net is the person and the remaining things after liabilities payment are the value of a person. So it is called as specific net worth of the person.
Now let’s look at how net worth is calculated in the stock market and business.
2: how is net worth calculated
In the stock market, there are two net worths. Business net worth and individual net worth.
The business net worth is determined by the total assets of the company subtracted from the total liabilities of the company.
when the company sells all its assets and pays all its liabilities its remaining amount is called equity. The equity is the owner’s money.
Which are owned by every shareholder. The equity is the real net worth of the company.
Because it doesn’t matter how wonderful a certain business is, there is no guarantee of stable income in the future.
The strong guarantees are the ones that we have if we suddenly sell the business and pay all the liabilities, the equity is the business’s net worth.
But when comes to individual net worth in the stock market, let’s say you have owned 7% of the Coca-Cola public company.
And coca-cola shares trading at $140 and 7 percent of the Coca-Cola shares are 4000 shares.
If you sold this 7% of the Coca-Cola company, multiply the 4000 shares by 140 dollars per share you would get 560k dollars.
Now most people think $560k is the worth of the individuals, no we must subtract the liabilities of the particular individual.
Let’s say have liabilities of 200k dollars. This means you have to subtract the 560k asset of shares with 200k of liabilities which leaves you with $360k.
So these 360k dollars are the real net worth of the particular individual. But the net worth and net price are not the same. Its have a difference.
3: net worth vs net price
Net worth are value of a certain item but the net price is not the value of a certain item Instead it is the price of the net item.
Let’s say the business’s net worth is 100k dollars, and the business produces $3000 each month. Now investors are willing to pay for the business which is 500k dollars.
Here 100k dollars is the net worth of the company and 500k dollars is the net price of the company.
The key difference is the value and price are not the same. Moreover, to make you more clear about the net worth let’s dig into the one example.
4: For an example of net worth
we saw the net worth of the business and individuals. Now let’s dig into how to find any net worth on anything.
Let’s say you have bought a car in finance. And the car they have 36 monthly payment terms.
Now you have paid the 24 months’ payments for the car and the car has 12 months of payments remaining.
Now if you sold the car to someone the car is worth $50,000 and also you have a remaining payment of 12 months which is $20,000 in finance.
If you sold the car for $50,000 and paid the 12 months remaining payment of $20,000. You would end with 30,000 dollars. That $30,000 is your real net worth.
Non-Market rule: #100173