Net worth is defined as which arithmetic?

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Multiple Choice

Net worth is defined as which arithmetic?

Net worth is the difference between what you own and what you owe. It is calculated by subtracting total liabilities from total assets. Think of assets as everything of value you own—cash, investments, real estate, cars, and valuables—and liabilities as what you owe—mortgages, loans, credit card debt, and other obligations. If your assets total 500,000 and your liabilities total 300,000, your net worth is 200,000. If liabilities exceed assets, net worth becomes negative. This is distinct from income minus expenses, which talks about cash flow over time, not the overall ownership after debts. It also wouldn’t make sense to add assets and liabilities together, since the goal is to see how much you own free of what you owe, i.e., assets minus liabilities.

Net worth is the difference between what you own and what you owe. It is calculated by subtracting total liabilities from total assets. Think of assets as everything of value you own—cash, investments, real estate, cars, and valuables—and liabilities as what you owe—mortgages, loans, credit card debt, and other obligations. If your assets total 500,000 and your liabilities total 300,000, your net worth is 200,000. If liabilities exceed assets, net worth becomes negative.

This is distinct from income minus expenses, which talks about cash flow over time, not the overall ownership after debts. It also wouldn’t make sense to add assets and liabilities together, since the goal is to see how much you own free of what you owe, i.e., assets minus liabilities.

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