Net worth

Net worth = Total assets - Total liabilities

Net worth represents the financial health of an individual or entity. It is calculated by subtracting total liabilities from total assets, providing a clear picture of net financial position. This measure helps assess financial stability and potential for future investments.

Example

If an individual owns a house worth $300,000 and has a car worth $20,000, but owes $50,000 on a mortgage and $10,000 on a car loan, their net worth would be $260,000 ($300,000 + $20,000 - $50,000 - $10,000).

Understanding net worth is crucial for making informed financial decisions and planning for the future.

Related concepts

Net present value

NPV = Sum of discounted cash flows - initial investment

Graham's net-net strategy is

Graham's net-net strategy: Buy stocks trading below net current asset value

Market capitalization

Market capitalization = share price × shares outstanding

Cyclically adjusted price-to-earnings ratio

Price-to-Earnings Ratio (P/E) measures market value relative to earnings

Value theory

Graham emphasizes intrinsic value as a company's true worth based on fundamentals

Earnings per share

Earnings per share (EPS) = Net income / Shares outstanding

Educational content, not financial advice.

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