How To Calculate Net Worth Of A Company – Net worth is very important. But for this you have to understand the calculation of Net Worth correctly. If the current financial condition of a person or company is good, then he can take any financial decision easily. But the net worth always keeps changing, so one should keep taking out his net worth from time to time. Due to not knowing the net worth, sometimes instead of profit, one may have to bear loss.
What Is Net Worth?
The property that remains after taking out the total liabilities of a person or company is called the Net Worth of that person or company.
The financial condition of any person or company can be ascertained from the net worth, that is, through the net worth it can be known how strong and how weak that person or company is financially.
The net worth of a person or company can also be in minus. Therefore, if you are lending money to someone or investing in a company, then definitely check what is the net worth of that company?
There are many such companies and individuals in India and other countries, who have loans or debts more than their personal assets. In such a situation, before investing in a company or lending money to a person, calculate its net worth, so that your money can be saved from getting stuck there. So let us now know how the net worth of a company or person is calculated –
How To Calculate Net Worth Of A Company
The method of calculating Net Worth is very simple, but before using it, you need to know about some other topics, which are as follows –
#) Total assets
If a person wants to find out the Net Worth of a person or company, then he should have accurate information about the total assets. The assets included in the total assets include –
Immovable property, such as – plot, land, house etc. Total capital deposited in the bank, money invested anywhere such as capital invested in share market, company etc. Price of jewelry deposited at home as per the current rate. Price of car, tractor or other vehicle that you have etc.
Note – While calculating the total assets, you will put the price of any thing according to its current price. Only then will you be able to calculate the net worth correctly.
#) Total Liabilities
While calculating Net Worth, apart from total assets, it is also necessary to know about the total liabilities, only then the calculation of accurate net worth is possible. The liabilities that come under total liabilities are as follows – home loan, vehicle loan, education loan, card loan etc. Apart from all this, all those loans are added in the total liabilities which you had taken in any way and you have to pay it.
Company Net Worth Formula (Net Worth Of The Company Formula)
The formula for calculating the net worth is as follows –
Net Worth = Total Assets – Liabilities
Net Worth can be calculated by keeping the calculation of your total assets and liabilities in this formula. Let us now understand it by example –
Suppose you want to calculate the net worth of a company, whose total assets are Rs 550 crores, and it has a liability of Rs 200 crores. So in this way you have to subtract the total liability from the total assets i.e. 550 crores. What will be obtained after that will be its net worth. Like –
Net Worth = Total Assets – Liabilities
550 crores – 200 crores = 250 crores
So in this way 250 crores is the net worth of that company. But remember that calculating the net worth is not that easy. Because it takes a long time to calculate the total income and remaining liabilities of big companies.
Some Important Points Related To Net Worth –
If you are knowing about net worth in such detail, then you must also know about some important points related to it, which are as follows –
The net worth of any company or person keeps increasing and decreasing from time to time according to its earning capacity and its liabilities.
You can understand the financial growth by comparing the net worth every year and find out the real financial condition.
Better net worth reflects the strong financial condition of any person.
Importance Of Net Worth
The better a person understands the importance of net worth, the better financial decisions he will be able to take. For example, if a person buys a house on the basis of installments according to his monthly or annual income without calculating his net worth, but due to some reason he loses his job, then he may face a final problem. Because now he will not have money to pay his installment, due to which he can also lose his house due to not being able to pay the installments.
If a person knows his Net Worth well and he knows that he can pay his installment in case of any problem. In such a situation, if he buys a house on installment, then he does not have any problem because he can easily short-circuit this problem.
However, Net Worth is never stable. It always keeps increasing or decreasing with time. That is why big companies and big businessmen of the country get their net worth calculated from time to time so that they can take the right financial decision.