Net Worth is defined as which of the following formulas?

Net Worth is defined as which of the following formulas?

• A. Total Assets minus Total Liabilities
• B. Total Liabilities minus Total Assets
• C. Revenues minus Expenses
• D. Assets plus Liabilities

Answer: (A)

Net worth is the amount owners have left after all debts are paid. It’s calculated by subtracting liabilities from assets, giving the ownership stake or residual value of the business or person. Assets are what you control and can use, while liabilities are what you owe to others; subtracting the two shows how much of those resources truly belong to the owners. If you subtract assets from liabilities, you’d get the opposite sign and not the true ownership value. Revenues minus expenses yields net income for a period, not net worth, and adding assets and liabilities mixes resources with obligations rather than measuring ownership. Therefore, the correct formula is assets minus liabilities.

Net worth is the amount owners have left after all debts are paid. It’s calculated by subtracting liabilities from assets, giving the ownership stake or residual value of the business or person. Assets are what you control and can use, while liabilities are what you owe to others; subtracting the two shows how much of those resources truly belong to the owners. If you subtract assets from liabilities, you’d get the opposite sign and not the true ownership value. Revenues minus expenses yields net income for a period, not net worth, and adding assets and liabilities mixes resources with obligations rather than measuring ownership. Therefore, the correct formula is assets minus liabilities.