Net worth definition

In personal financial terms, net worth is the remainder after subtracting liabilities from assets. In business terms, it is also referred to as shareholders' equity or book value in the financial statements.

Net worth is an important consideration for banks when deciding whether or not to loan money to an individual or business. A positive net worth demonstrates two important things:

1. It is an obvious indicator of financial performance by the borrower and the possibility of obtaining collateral.

2. It is an indication that the borrower has demonstrated financial discipline.