Calculating net worth percentage involves determining the proportion of an individual’s or organization’s total assets compared to their total liabilities. For instance, if an individual has assets worth $500,000 and liabilities of $100,000, their net worth percentage would be 80% (500,000/600,000*100).
Calculating net worth percentage is crucial for understanding financial health. It helps individuals and organizations assess their financial position, make informed investment decisions, and plan for the future. Historically, net worth calculations have been utilized by banks and lending institutions to assess borrowers’ creditworthiness and determine loan terms.