Forbes list of Billionaires and their net worth never fails to gather interest of one and all. We often read with great interest, news that ‘Mukesh Ambani ‘s net worth is 36 B USD, Sachin Bansal is over $1 B USD etc. Let’s explore what this means and why it is important.
What does a Net worth Mean?
Net worth is the net of what you own over what you owe, i.e Assets over the liabilities. For a company this information is captured in the Balance Sheet and is updated at the end of an year.
Why is Net worth Important?
While your personal Income and Expenses statement that we earlier saw captures your current earning, spending and savings on a monthly basis, Net worth is the end result or your progress card of how well you have done so far with your Income and Expenses.
Your Personal Balance sheet/Net worth is an indicator of your resilience to impact in your earning ability. This is why bank’s ask for surety when they extend a loan.