Calculating net worth is a fundamental aspect of ratio analysis, which assesses a company’s financial health and performance. It involves determining the difference between a company’s total assets and total liabilities.
Calculating net worth is crucial for investors, creditors, and other stakeholders to understand the company’s financial position. It provides insights into its overall stability, liquidity, and solvency. Historically, the concept of net worth has evolved from early bookkeeping practices to become a key indicator in modern financial analysis.