Calculating a company’s net worth from its balance sheet is crucial for determining its financial health. Net worth, often called shareholders’ equity, represents the difference between the company’s assets and liabilities. For example, if a company has $100 million in assets and $50 million in liabilities, its net worth would be $50 million.
Knowing how to calculate net worth is essential for investors, creditors, and other stakeholders. It can provide insights into a company’s ability to meet its financial obligations and its overall financial stability. Historically, the concept of net worth has been used for centuries to assess the financial health of businesses and individuals.