What is NET WORTH?
NET WORTH
Hey guys, today's topic is - What is NET WORTH? In this topic, we will understand the importance of NET WORTH and also learn how to CALCULATE NET WORTH?
What is NET WORTH?
NET WORTH is a financial term that describes the net assets possessed by a person, company, institution, and also through NETWORTH we can understand the real financial condition of that person, company, institution,
Hereby net wealth (NETWORTH), we mean that whatever assets the organization has (TOTAL ASSET), whatever is left in the form of assets after deducting all the TOTAL LIABILITIES from them. That institution will be called NETWORTH,
For example - we often get to hear about a "NETWORTH" in relation to the financial position of a company, cricketer, or film star, or any other celebrity on a newspaper, internet, or TV, recently Virat In connection with the marriage of Kohli and Anushka Sharma, the news of their two NETWORTH was VIRAL,
So the thing to note here is that NETWORTH can be easily understood about the financial position of a person, company, or institution, and to explain the financial strength of Virat and Anushka Sharma only talk about their NETWORTH Its being done,
Understanding NETWORTH becomes very important because NETWORTH itself tells the real state of a person, company, or organization,
In such a situation, a person, company, or organization may have a lot of assets, but at the same time it has a lot of responsibilities on it, So if you have to understand his financial situation, how will you understand?
Importance of NET WORTH,
Before any decision related to financial planning and finance, if you do not know about your "NETWORTH", then it is possible that you will take some decision that will cause you a lot of trouble in the future. Have to do it,
Like - today if your SALARY is very good, and you buy a very expensive car or house based on CURRENT INCOME without paying attention to your NET WORTH because the bank will buy you a LOAN based on your salary. Gives it easily,
So the thing to note is that, in such a situation, if for some reason you have to leave the job, and your salary's INCOME is stopped,
In such a situation, if the total cost of your NET WORTH car or the price of the house (including loan interest) and not more than that, you may have to lose your car or house, and you have to decide about getting your car. I may also have to repent,
If you had already done your NETWORTH CALCULATE while taking the car, then perhaps you could have kept the car with you even after leaving the job today,
Therefore, before making any such financial decision, we all must understand our NET WORTH, so that we can make a better financial decision,
How NET WORTH is calculated,
Calculating Net worth is very easy, it is very easy to calculate, All you have to do is subtract the sum of your total liabilities from the sum of your total assets,
NET WORTH = TOTAL ASSET - TOTAL LIABILITIES
But you may have to work a little, to sum up your total assets and total liabilities,
STEP OF CALCULATING NET WORTH
1. MAKE LIST OF ALL ASSETS
First of all, you have to make a complete LIST of your ASSET,
In ASSET, all your type of CASH, BANK deposits, investment amount, your house, land, plots, or whatever you consider property,
2.MAKE LIST OF ALL LIABILITIES
Then you have to make a list of all your obligations, Obligations on you include all types of SHORT TERM and LONG TERM LOAN, be it HOME LOAN, car loan, mobile, TV, freeze or personal loan, and any kind of HAND LOAN, borrowings, to be included in the list,
3. The third step is - Valuation
Now you have to apply today's market price of all the ASSETs that you have listed, that is to write their MARKET VALUE,
Also, LOAN and LIABILITIES will also have to extract the current VALUE for all their ways, for which you may have to ask for a statement of outstanding loan from where you have taken the loan,
4. TOTAL of Asset and Liabilities
Now you have to total assets and liabilities, that is, how much property is being totaled, and what is the total sum of liabilities, And write a different total of both,
5. FINAL STEP OF NET WORTH CALCULATION
Now all you have to do is reduce the total liability from the total assets -
Net worth = Total assets - Total liabilities
And in this way, you can do your NET WORTH CALCULATION anytime, And this is how the company and organization do their NET WORTH CALCULATE,
It is very important to understand the NET WORTH of LISTED company before any kind of investment in the stock market, And thus, doing NET WORTH CALCULATION becomes an important part of FUNDAMENTAL ANALYSIS,
Things to note about NET WORTH:
- NETWORTH is very easy, it is your value (NET VALUE), which is obtained by deducting your total liabilities from your total assets,
- Another meaning of NET WORTH also is that out of the value of selling your total assets, after paying your total obligations, the remaining money or property,
- NET WORTH can also be in negative amounts, it will happen when there is more liability than property, although this situation is absolutely scary, most people get caught in such a situation, knowingly or unknowingly.
- NET WORTH varies over time, depending on the individual, institution or company's ability to make a profit and the LOAN and other obligations it incurs,
- You can compare your financial growth on a year to year basis by NET WORTH, and you will always have an idea of your actual economic situation,
- Economic decisions should not be taken only on the basis of NET WORTH, future responsibility also has to be kept in mind,
- It is worth noting that net worth does not include any major responsibility in the FUTURE, so we should not take any financial decision based on NET WORTH only.
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