How is net worth calculated?

How is net worth calculated?

• A. Total assets divided by total liabilities
• B. Total assets added to total income
• C. Total assets minus total liabilities
• D. Total liabilities minus total assets

Answer: (C)

Net worth is calculated by taking the total value of all assets owned and subtracting the total amount of liabilities owed. This calculation provides a clear financial snapshot, indicating what a person actually owns outright versus what they owe to others. When total assets are greater than total liabilities, the result is a positive net worth, which signifies financial health. Conversely, if liabilities exceed assets, the net worth is negative, indicating potential financial difficulties. This method is a fundamental concept in personal finance and wealth management, making option C the correct answer.

Net worth is calculated by taking the total value of all assets owned and subtracting the total amount of liabilities owed. This calculation provides a clear financial snapshot, indicating what a person actually owns outright versus what they owe to others. When total assets are greater than total liabilities, the result is a positive net worth, which signifies financial health. Conversely, if liabilities exceed assets, the net worth is negative, indicating potential financial difficulties. This method is a fundamental concept in personal finance and wealth management, making option C the correct answer.