Owner's Equity Vs. Net Worth

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Balance sheet with calculator
Balance sheet with calculator (Image: minoandriani/iStock/Getty Images)

Owner's equity and net worth typically are used to mean the same thing. However, one difference is that owner's equity more often defines the value of an individual's investment in a business, whereas net worth refers to the overall book value of the company.

Owner's Equity Basics

In accounting terms, owner's equity is the difference between a company's assets and liabilities at a given point in time. If assets total $300,000 and liabilities equal $250,000, the owner's equity is $50,000. Another perspective is that owner's equity is what remains if the business is sold and all assets are liquidated to pay debts. Companies prepare owners' equity statements periodically to illustrate its value. Owners' equity also is demonstrated on a company's balance sheet.

Net Worth Usage

Though net worth is synonymous to equity in a business, it sometimes is used in different contexts. For instance, it is more typical for someone to say, "The net worth of company XYZ is $50,000," than to say, "The owners' equity of company XYZ is $50,000." Individuals may also refer to their own assets and liabilities differential as personal net worth. However, when someone invests in a company, his investment value often is referred to as his equity investment.

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