What is Net Worth?
Nexa Consultancy | Startup & Finance Glossary
Net Worth is a measure of a company's financial value, calculated as the difference between its total assets and total liabilities. It is also known as Shareholders' Equity or Book Value. It represents the amount that would be left for shareholders if all of a company's assets were liquidated and all of its debts were paid off.
For Startups: For a growing startup, net worth can be a misleading metric. A startup might have a low or even negative net worth on its balance sheet (especially if it has significant debt), but its market valuation could be very high based on its future growth potential. However, a consistently declining net worth due to mounting losses can be a sign of financial distress.
Calculation: Net Worth = Total Assets - Total Liabilities.
Example: A company has assets worth ₹2 Crore and liabilities of ₹1.5 Crore. Its net worth is ₹50 Lakhs.