Calculating net worth from a balance sheet involves subtracting liabilities from assets. For instance, if a company’s assets total $150,000 and its liabilities are $50,000, its net worth is $100,000.
Net worth calculation plays a crucial role in assessing financial health and stability. It helps businesses monitor their financial performance, make informed decisions, and attract investors. Historically, the adoption of standard accounting practices has enhanced the accuracy and reliability of balance sheets, making net worth calculations more meaningful.