Monday, August 29, 2016

Know Your Value: Here’s How to Calculate Your Company’s Net Worth

A company’s net worth is its overall value in a specific time and date. Calculating it is not as hard as it seems. The calculation applies to sole proprietorship, large corporations, and other kinds of companies. Business leaders and owners must remember, however, that the value of a company changes. A particular net worth value is only true at a specific point in time.

Here’s a guide on how to calculate a business’ net worth.

Image source: time.com


First, add all of the company’s asset. Current assets include investments, account receivables, cash, and other kinds of assets that can be converted into cash equivalents. When doing this, the current value should be used in the computation.

After adding all the current assets, add all short- and long-term liabilities. Bills, accounts payables, and loans are included here.


Image source: martabrisco.com


Subtract the total value of liabilities from the assets. The result is called the company’s net assets or net worth during the time of computation. If the company has common stocks or a good investment portfolio, its net worth can change only hours or minutes after this is done. For easier tracking, net worth calculations do not need to be too detailed. For corporations, the net worth result should be compared with its stock value and retained earnings.

Hi, I’m Steve Sorensen. I write a lot about companies’ net worth, investments, and other business topics. Follow me on Twitter for the latest business news.

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