| Net Worth |
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To calculate net worth, there are roughly two approaches. The first is to value all assets and liabilities at the value they were obtained, less depreciation or plus appreciation. This is typically done in Accounting to produce companies' Balance Sheet s. The disadvantage of this approach, is that the value at which an item is listed, might not be the amount that you receive when you try to sell it. To remedy this problem, assets are sometimes Marked To Market . This means, that the value that is used for an item is that at which you can sell it in the open market. Using this method net worth will vary, as prices on the open market vary. It is sometimes difficult to find a Mark To Market for illiquid assets, such as Real Estate and shares in unlisted companies. The estimate has to be made then based on readily available comparable valuations. SEE ALSO |
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