How to Calculate Net Worth: Step-by-Step Guide

How to Calculate Net Worth of a Business
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Knowing how to calculate net worth after deducting all of your assets and liabilities can help you figure out what’s working and what needs to be fixed in your financial life. Your net worth is calculated as the sum of all of your assets less all of your obligations. In other words, it is all you own less everything you owe. You have a negative net worth if you owe more money than you own. You will have a good net worth if you possess more than you owe. This calculator aids in calculating your net worth and projects its potential growth (or decline) over the following 10 years. In this article, we will learn how to calculate the net worth of a business or a company using a step-by-step guide.

How to Calculate Net Worth 

Although understanding how to calculate net worth may appear straightforward, it’s crucial to understand how assets and liabilities are determined and what exactly is included in each category. The processes of calculating a person’s net worth are outlined below.

There are various levels at which the idea of net worth might be used. It can be used by a single person, a bunch of people, a company, a government, or even a full city or nation. We shall restrict our discussion to the net worth of either people or companies for the sake of simplicity.

Additionally, when you know how to calculate net worth, it may be a useful tool for assessing a person’s or business’s wealth as well as the general health of their financial situation. You can use it to determine what you might need to do to accomplish your financial objectives.

Subtract all debts and liabilities from the total value of your assets to determine your net worth. In other words, deduct your debt from your assets. You must first sum up your assets and liabilities, which can take some time, in order to achieve this. The steps to calculate net worth is shown below.

#1. Total Up Your Resources

All items that might be regarded as assets should have their entire values added. Anything with monetary value qualifies as an asset. Cash, checking and savings accounts, equities, bonds, mutual funds, and retirement accounts can all fall under this category. Personal belongings like real estate, vehicles, and jewelry are also considered assets.

You could get anything appraised if you’re unsure of its value. But you might pay for that. You may therefore evaluate your net worth yourself to get a ballpark figure if you only want to get a broad sense.

#2. Total Up Your Debts

A liability is a debt or financial commitment, such as a mortgage or loan. Basically, it’s everything you owe. Liabilities may consist of the following:

  • Charge-card debt
  • Auto loans
  • Individual loans
  • education loans
  • housing loan
  • Add up all of your debts to determine the total sum of your liabilities.

Calculate Net Worth

You are now prepared to calculate net worth because you have an overview of your assets and obligations. Liabilities must be subtracted from assets to obtain net worth. Depending on the size of your assets and liabilities, you will either get a positive or negative number after doing this.

How to Calculate Net Worth of a Company 

People utilize a variety of metrics to figure out how to calculate net worth of a company. Here is the calculation used to determine the exact value of the company’s net worth.

When valuing a firm, investors use a variety of criteria and measurements. It’s crucial to help you understand the firm and its future, but it’s also useful for pointing out prospective possibilities and businesses that you should avoid since they might be overvalued.

Knowing a company’s market value, however, simply tells you how much the company is worth to investors right now.

This is particularly true for industries that demand substantial investments in property, machinery, and other expensive or valuable assets. Knowing how to calculate the net worth of those assets is crucial in light of this. In reality, knowing how to calculate the net worth of a is rather simple. The company’s net worth or the net value of all of its assets after liabilities like debt have been paid, is another crucial concept to comprehend. Here is a closer look at several measures, their definitions, and how to determine a company’s net worth.

The Formula to Calculate the Net Worth of a Company

Total assets minus total liabilities = net worth.

The formula used to determine one’s personal net worth is the same as this one, which is also known as “shareholders’ equity.” This straightforward method effectively determines what would remain after liabilities have been settled in the event that a firm was to be dissolved and sold off at the carrying value of all of its assets. It then divides the remaining amount among all shareholders.

The “tangible book value” that deducts the value of intangible assets like goodwill is slightly different from this. You can locate the financial data needed to calculate net worth of a company.

Calculating a company’s net worth or any of the other several market value and asset value measurements is merely the first step in determining its value. It’s also important to note that since industries can differ substantially, it’s not a good idea to compare the per-share asset value of a high-tech, asset-light company to a steelmaker. It is preferable to utilize these measurements when contrasting businesses operating in the same or very similar industries, constantly keeping an eye on the company’s future growth potential.

How to Calculate the Net Worth of a Business 

It is easy to figure out how to calculate the net worth of a business. You need to know the assets and liabilities of your firm before you can determine its net value. Your firm’s balance sheet contains details about your assets and liabilities.


The valuable items in your business are its assets. The things are the property of your company and can be used to cover costs, obligations, and wages.

Assets might be physical or abstract. Physical objects like a corporate car are examples of tangible assets. A trademark is an example of an intangible asset—something of value that is not physically present.

The value of tangible assets should be included to calculate net worth of a business. Estimate the worth of your intangible assets as well. To make precise estimates, you can engage an appraiser. You can be able to calculate the total net worth of your business by adding the tangible and intangible assets together.


Liabilities are the money owed by your company to other businesses, vendors, employees, and governmental organizations. Also, liabilities that arise from routine business activities must be paid by your organization.

On the balance sheet, liabilities are divided into two groups: short-term and long-term. Invoices are an example of a short-term liability that is typically paid off within a year. Long-term obligations last for more than a year, like loans to small businesses. Add the short-term and long-term obligations to determine the company’s net worth.

It is simple, how to calculate net worth of a business is by adding up all of its assets and obligations, then deducting the total liability amount from the total asset amount.

  • Add up all the company’s assets. A small business might have $650,000 in equipment, $35,000 in accounts receivable, $50,000 in cash, and $620,000 in the land. These assets are worth a total of $1,355,000.
  • Include the debts that the company must pay back. Continuing the scenario, the company has $125,000 in accounts payable, $550,000 in equipment loans, and a $600,000 commercial mortgage on a warehouse. There are $1,275,000 in liabilities overall for this company.

What Is a Good Net Worth by Age?

In 2019, $76,300 is a good net worth for someone under the age of 35. From there, each age group’s positive net worth increases steadily. The average net worth is $436,200 for people aged 35 to 44 and $833,200 for people aged 45 to 54. Between the ages of 55 and 64, the average net worth surpasses $1 million, rising to $1,175,900.

Moreover, a good net worth increases from $1,217,700 for people aged 65 to 74 to $977,600 for those over 75.

But in every age group, the median net worth is less than the average net worth. According to the Fed’s research, age and net, worth are positively correlated, with most Americans experiencing an increase in their net worth as they age, earn more money, and have more time to save and invest.

Your net worth is likely to level or decline once you reach retirement age and start relying on your investments and savings for income.

Is Salary Part of Net Worth? 

Salary is not part of net worth. It is not included in the computation of net worth. A person who spends most of their income may have a high income but a low net worth. On the other hand, if they purchase appreciating assets and are wise savers, even persons with small salaries can amass large wealth and high net worth.

Why Do We Calculate Net Worth? 

It’s important to calculate your net worth because it can show you where your spending is excessive. There is no obligation to purchase anything just because you can pay for it. Before making a purchase, decide if it is a need or a want to prevent debt from building up excessively. Your needs should make up the majority of your spending in order to decrease wasteful spending and debt.

Additionally, knowing your net worth figures can inspire you to put money aside and make investments. If your net worth statement indicates that you are on schedule to reach your financial objectives, it may inspire you to keep going in the same direction. In contrast, if your net worth shows space for improvement (for instance, over time, your assets are depreciating while your liabilities are growing), it may be the necessary spark of inspiration to adopt a more aggressive approach to saving and investing your money.

What Is Net Worth Example? 

Net worth can provide a lot of information. If the number is negative, you owe more money than you do not owe. For example, if the result is positive, you possess more than you owe. You will have a positive net worth of $100,000 ($200,000 – $100,000 = $100,000) if your assets are equal to $200,000 and your liabilities are $100,000. On the other hand, if your liabilities total $200,000 and your assets are $100,000, your net worth will be negative ($100,000 – $200,000 = -$100,000). A negative net worth just means you now have more liabilities than assets, which does not necessarily suggest you are financially irresponsible.

What Net Worth Is Rich? 

Americans think that in order to be considered rich, a person needs to have a net worth of $2.2 million on average. (Your total asset value less your liability value equals your net worth.)

What Is a Good Net Worth at 40?

Your objective is to achieve a net worth that is twice your yearly wage by the time you are 40. Therefore, if your pay gradually increases to $80,000 in your 30s, you should aim to have a net worth of $160,000 by the age of 40. Additionally, increasing your net worth is not limited to retirement contributions.


To obtain a sense of your overall assets and financial health, calculating your net worth can be useful. Simply deducting your liabilities from your income will do the job. And regardless of your current net worth, there are always things you can do to increase it, such as paying off debt or expanding your savings.

Your credit score is another indicator of financial wellness. You may find out how long it might take to establish credit and how using a credit card can help.


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