Net Worth

Net Worth (1) For the purpose of ratio analysis net worth is taken to represent shareholder’s funds, i.e. equity share capital plus reserves. (2) A company’s net worth is the sum of its assets minus its liabilities. It has been pointed out, however, that this definition is misleading on at least tow counts; the book value of the assets is usually taken into consideration, whereas the market value should be more relevant; also, the goodwill of a company, an intangible asset, does not eve feature on a company’s balance sheet. Therefore, in order to arrive at the true net worth of a company these must be assessed and taken into calculation.

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