Which statement best defines net worth?

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Multiple Choice

Which statement best defines net worth?

Net worth shows your financial position by subtracting what you owe from what you own. It’s the value left over after you take liabilities (debts and obligations) away from assets (things of value you control, like cash, property, investments). This is why the correct idea is that net worth equals assets minus liabilities. Think of assets as resources that have value and liabilities as debts you must pay. If you owe more than you own, net worth can be negative; if you own more than you owe, it’s positive. The other ideas don’t capture the whole picture: the total value of assets doesn’t account for debts; revenue minus expenses relates to profitability over a period (net income); and the cash balance at the end of a period is just cash on hand, not total ownership after debts.

Net worth shows your financial position by subtracting what you owe from what you own. It’s the value left over after you take liabilities (debts and obligations) away from assets (things of value you control, like cash, property, investments). This is why the correct idea is that net worth equals assets minus liabilities.

Think of assets as resources that have value and liabilities as debts you must pay. If you owe more than you own, net worth can be negative; if you own more than you owe, it’s positive.

The other ideas don’t capture the whole picture: the total value of assets doesn’t account for debts; revenue minus expenses relates to profitability over a period (net income); and the cash balance at the end of a period is just cash on hand, not total ownership after debts.

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