Net worth

From Financial Literacy Wiki

Net Worth is computed by taking your assets and deduct your liabilities such as loans and credit card balance from it. As reflected in the equation below:

Net Worth = Assets - Liabilities

If your assets exceeds your liabilities, then you have positive net worth and hence true wealth. But one most note that it is possible for one to have a lot of assets and yet have a low net worth, because you assets are financed primarily by loans.

If your net worth is negative, then technically you are bankrupt. Thus it is important that you maintain a positive net worth.

As you can see from here, it is the goal of many to increase their net worth over time. Looking at the balance sheet, your net worth depends on the value of your assets. Since the market value of your assets fluctuates everyday, your financial position or net worth will fluctuate accordingly.