Calculating net worth ratio, a metric reflecting financial health, involves determining the difference between assets and liabilities. For instance, an individual with $100,000 in assets and $20,000 in liabilities has a net worth of $80,000, resulting in a net worth ratio of 80%.
This ratio is crucial in evaluating creditworthiness, investment potential, and progress towards financial goals. Historically, the development of personal finance software and online calculators has simplified the calculation process.