A net worth statement calculation comprises a financial summary that reveals an individual or organization’s financial health. It can help individuals track their assets, liabilities, and overall financial position. This statement is calculated by subtracting liabilities from assets. For instance, if an individual owns assets worth $250,000 and has liabilities of $100,000, their net worth would be $150,000.
Net worth statements are essential for various reasons. They assist individuals in making informed financial decisions, evaluating their progress toward financial objectives, and identifying areas for improvement. Historically, the concept of net worth has roots in Renaissance-era accounting practices.