An adjusted net worth ratio measures a company’s solvency, or ability to meet its financial obligations as they come due. It considers not only the company’s assets but also items such as goodwill and intangible assets. For example, a company with an adjusted net worth ratio of 1.5 has $1.50 of assets for every $1.00 of liabilities.
Adjusted net worth is a valuable tool for creditors and investors as it provides a more accurate picture of a company’s financial health than traditional measures such as net worth or equity. This ratio was developed by Benjamin Graham, a renowned economist, and investor who is considered the father of value investing.