Net worth

Capital, often referred to as net worth, is the money value of the business, since assets are the money values of things the business owns while liabilities are the money values of the things the business owes. 

Row 3 in Table 9-24 is the return on equity (ROE) of Eq. (9-130). In this case, the net worth is the tangible net worth representing the sum of the preferred and common stocks and the surplus and undistributed profits or retained earnings, less any intangible items such as goodwill, etc. 

If it is assumed that available interest rates offered by banks, government, etc., for no-risk investment of capital are 10 percent, then the maximum economic market price of 100 stock units in this hypothetical company is about 117. If all the debt is in bonds, etc., earnings on ordinaiy stock would be 10 cents per dollar of net worth, and the maximum economic price of the stock would be about 100 unless stock prices were expected to rise. 

The reconciliation between the cash flow statement and the income and expense statement is as follows. Start with the 40,000 from the last line in the cash flow statement, subtract 20,000 for the depreciation expense, and add back the 30,000 mortgage loan principal payment (not an allowed expense). The result is the net after-tax earnings. Figure B.ll is a set of statements from a small oil company. The statement of operations lists revenue and expenses, whereas the balance sheet lists various assets, liabilities, and stockholders equity ( net worth ). So-called capital items such as buildings, equipment, oil and gas property, and various intangibles are assets. Operating costs are deductions from revenues for operations not including expenditures for capital items. 

C. Balance sheet current and fixed assets, current and long-term liabilities, net worth... 

Book value of common stock Net worth of a firm divided by the number of shares of common stock issued at the time of a report. 

Net worth The sum of the stockholders investment plus surplus, or total assets minus total liabilities. 

Return on net worth (return on equity) Net profit after taxes/net worth 15%... 

The difference between assets and liabilities is then the owners equity or the financial net worth of the company. 

The first step in your analysis is to determine your net worth. This is a summary of your spending and saving habits. It shows the cumulative effect of your financial decisions. It not only shows how you re doing, but also gives clues to potential changes to improve your financial future. 

In simple terms, your net worth is the difference between what you owe and what you own. If you come out owning more than you owe, you have a positive net worth. If the opposite is true, you have a negative net worth. 

Net worth statements have common categories of assets and debts. Debts are generally divided into two categories secured and unsecured. Assets are generally divided into the following categories ... 

To compute your net worth, gather all your financial records such as checkbooks, statements from banks, mutual funds, credit unions, and brokerage houses, and your loan balances. Check the value of your residence, automobiles, tools, and equipment by reading the classified section of your daily newspaper. You are now ready to compute your net worth using the following worksheet. 

Net Worth (Total Assets minus Total Liabilities) ... 

If a review of your net worth suggests something needs to be done to improve your financial situation, the best way to understand the problem is to compare what you earn to what you spend. This is called a cash flow analysis. It gets to the basic question of how much of your income is spent on debt service, consumption, and savings. It also answers the question of how much more you are spending than you have coming in—or vice versa. 

List Your Assets. Refer to your net worth statement prepared in Chapter 16 and record all assets at current market value. List any insurance policies at face value rather than cash-surrender value. 

What would a personal net worth statement help a recent pharmacy graduate assess ... 

What is owned (assets) — what is owed (liabilities) = net worth... 

It is not uncommon for pharmacy students to have a negative net worth. For example, if all of Daniel Keene s possessions are worth 10,000 and he owes 130,000 in student loans, then his net worth is — 120,000. 

Table 19-3 provides an example of determining one s net worth. Assets are cash and other tangible property with monetary value. In this example, assets are divided into current assets and long-term assets. Liquid assets are current assets that are easily converted to cash. For example, a checking account is a liquid asset. Long-term assets include such items as real estate, personal possessions, and investment assets. Real estate may include the value of one s house and/or any rental property that one might own. Personal possessions might include such items as the market value of a person s car, furniture, jewelry, and computer. Investment assets include such items as the market value of mutual funds and retirement accounts. 

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