Net Worth

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Definition of 'Net Worth'

Net worth is a measure of an individual's or entity's financial position, calculated by subtracting the total liabilities from the total assets. In other words, net worth is the amount by which an individual's assets exceed their liabilities.

Assets can include a wide range of items, such as cash and cash equivalents, real estate, investments, personal property, and other valuables. Liabilities can include debts, such as mortgages, loans, credit card balances, and other financial obligations.

Calculating net worth is an important step in understanding one's financial health, as it can give a clear picture of overall wealth and provide a benchmark for setting financial goals. Net worth can also be used to determine an individual's ability to take on additional debt or invest in new opportunities.

It is worth noting that net worth does not provide a complete picture of an individual's financial situation, as it does not account for income, expenses, or cash flow. Nevertheless, it can be a useful tool for evaluating financial progress and making informed decisions about investments, debt management, and other financial goals.

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