How to Calculate Net Worth on a Company's Balance Sheet
Net worth is one of the primary figures analysts use to determine a company's financial strength. Unlike other financial calculations and ratios that only represent one dimension of a company's finances, net worth reflects the end value of a company's entire history of growth, development, investment and earnings. The net worth calculation takes into account both a company's assets and its liabilities. Since a company with a high and rising net worth is seen as being creditworthy, the proper calculation of a company's net worth can be important to the company's ability to obtain financing for future growth.
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Instructions
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Get the company's total assets. Total assets are different than current assents. Current assets reflect only those assets that a company can readily turn to cash, such as accounts receivable, inventory and actual cash on hand. The total assets of a company include longer-term assets that may not be readily convertible to cash, such as buildings and operating equipment. The net worth calculation uses total assets, not current assets.
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Identify the company's total liabilities. As with assets, total liabilities include all the costs and obligations a company has, regardless of duration, whereas current liabilities only refers to debts owed over the next year. The net worth calculation requires total liabilities, not just current liabilities.
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Subtract total liabilities from total assets. This calculation gives you a company's net worth. Net worth can be listed on financial statements under other names, including shareholders' equity, net assets or owner's equity.
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