Calculating a company’s net worth from its balance sheet provides valuable insights into its financial health. Net worth, defined as the difference between total assets and total liabilities, serves as a measure of a company’s financial strength and liquidity.
Understanding this concept is crucial for investors making informed investment decisions, creditors evaluating a company’s creditworthiness, and businesses assessing their financial position. The historical development of balance sheets dates back centuries, with their origins in the need for accurate financial reporting.