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Simple English definitions for legal terms
net worth
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A quick definition of net worth:
Net worth: The amount of money and valuable things a person or company has after subtracting what they owe to others. It's like counting all the money you have in your piggy bank and taking away any money you owe to your friends or family. This tells you how much you really have.
A more thorough explanation:
Definition: Net worth is a measure of one's wealth, usually calculated as the excess of total assets over total liabilities.
Examples:
- If you own a house worth $500,000 and have $200,000 in savings, but also have a mortgage of $300,000 and credit card debt of $10,000, your net worth would be $390,000 ($500,000 + $200,000 - $300,000 - $10,000).
- A company's net worth is calculated by subtracting its total liabilities (such as loans and debts) from its total assets (such as property, equipment, and cash).
These examples illustrate how net worth is calculated by subtracting what you owe (liabilities) from what you own (assets). The resulting number represents your overall financial worth or wealth.