Calculating a company’s net worth, which represents its financial health, involves determining the difference between its assets and liabilities. For instance, a company with $100 million in assets and $50 million in liabilities has a net worth of $50 million.
Understanding how to calculate net worth is crucial for investors assessing a company’s financial stability and growth potential. It aids in comparing companies, making informed investment decisions, and identifying undervalued businesses. Historically, net worth has been a fundamental metric used by businesses and investors since the 18th century.