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How to Calculate Net Worth of a Company? | Definition | Top Example - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
of WallStreetmojo watch the video
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till the end and if you are new to this
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clicking the bell icon friends today we have going to learn a concept which is how to
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calculate the net worth of the company
you're gonna understand the formula and
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some of the top examples of the same
well we'll begin with the same the net
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worth of the company is basically you
may heard about the term quite often I
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mean don't you
especially when the newspaper the
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business magazines and the finance
journals they talk about the significant
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individuals in the financial world if
you're someone who would like to
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understand the net worth or wants to
find out your own net worth than in that
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scenario what's gonna happen is that you
know this brief guide or this brief you
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told is definitely going to help you
know in simple terms the net worth is
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the net assets and the earnings is the
net assets and the net earnings after
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you need to deduct all the liabilities
and the expenses so what is their net
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worth of the company see net worth of the company is nothing but the book value of
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the shareholders equity the firm the
shareholders equity of the firm now the
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net worth of the company is the value of
the assets after paying of its
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liabilities the liabilities is sort of
like it so what we need to know to hear
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that you know the net worth is different
from the market value of the company or
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you can say the market cap they both are
different thing altogether but let's
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take an example of Apple and Amazon and
what we note we know that you know the
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apples are net worth apples net worth is
$134.05 Billion and that of
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Amazon this is for the apples net worth
and for the Amazons net worth it's
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$19.2 billion
so however the market
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capitalization is this is the net worth
the market cap is 898
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5 billion and 592.29 billion for Amazon as you can
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see over here the graph of Apple and
Amazon the Apple is in blue and that the
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Amazons isn't red so the number of 134.05 billion and
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19.29 billion is here as you
can see so well I showed you the numbers
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in the graph let's understand the
formula for network see the net worth of
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the company formula is gonna be the
total assets less the total liabilities
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so the above is also known as your
shareholders equity or you can say the
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book value so what we need to know that
you know this that this is different
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from the tangible book value which also
removes the value of the intangible
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assets like you know the goodwill part
the patents and so on and so forth so
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how to calculate
the network
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of the company well let's take an
example over here and understand the
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whole concept let's say there's a guy
called Mr.A and mystery has a hold of
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the balance sheet or for let's say Q
company but while traveling Mr.A lost
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the last part of the balance sheet
so how would you calculate the net worth
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of the company ABC I've taken doubt the
detail on the next sheet over here the
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assets and the liabilities detail well
here the competition is easy all Mr A
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needs to do is to calculate the net
worth of the company of ABC by deducting
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the total liability from the total
assets so we have the details of the
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assets here and then we have the detail
of the liabilities here so let's try and
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evaluate the total assets and liability
the total assets that is a is going to
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be 615 this is going to be a total
assets right and the total liability is
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a 315 control-r so once we do we
just need to read up on the net worth of
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the company
well that's going to be
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less 315 that's 58 lac or 5.8
million and 5.7 million for 2016 and
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running 15 respectively now how would
you interpret the growth or decrease of
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the net worth what has happened here
this is an increase in their net worth
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but what a how will you evaluate things
see both for the business and individual
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the assets and liabilities can go down
or can go up if you see the net worth of
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business well or as an individual has
been growing now we can easily say that
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you know the increase in the assets and
the earnings
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individual has been more than the
increase in the liability
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and the expenses or we can also say that
they are decreasing the assets and the
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earning of the business is less than the
decrease in the liability of the
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expenses so we'll take the increasing
net worth of the company example ability
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I'm gonna show you the Amazons net worth
which has been increasing continuously
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over the past 5 years period and this
is just because they have been able to
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increase the assets and the earning over
the Period of time see the graph down the
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line here as you can see from 2010
onward to 2016 in the
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$19.2 billion dollars net worth is
absolutely increasing at a rapid pace
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sparked if you see you know the Sears is
holding it has a decreasing net worth of
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the company a net decreasing trend now
this is for the Sears Holding Book value
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as you can see there's a clear drop down
there's a complete decline a significant
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decline in the value of the net worth it
as from 11.25 and
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closely it is negative $3.82 billion so
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there's a quite drawback or you can say
there's a is a free fall that we saw for
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the Sears company so what is the net
worth I mean what is the net worth from
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an individual perspective see recently
there was a guy called Chris Larsen he
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was a co-founder of the cryptocurrency
company ripple and has become the fifth
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wealthiest person in terms of the net
worth now that we understand that what
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is net worth of the company let's look
at the how the net worth can be
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calculated of the individual from the
individual perspective net worth means
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you know the difference between how much
a person owns and how much the owes so
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as a simple example let's say the debit
has a home or car and a portfolio
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investment so his home is let's say his
worth of $120,000 the car he owned
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is let's say $20,000 and the portfolio
of the investments is standing at
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$50,000 so he has taken a mortgage loan
on this
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what has it occurred a mortgage loan now
for his home which is around let's say
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$60,000 which has already been paid out
$10,000 so he has also taken a car loan
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let's say $10,000 so what will the net
vote at this very juncture so this is a
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quite simple example all we need to do
is add up the assets with the debit and
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then deduct all the liabilities so
David total assets is $120,000
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+20,000+50,000+
that's it
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so that's gonna be one like thank
there's a twist here in the examples it
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says that out of the 60,000 David has
taken a loan of 10,000 right
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this has already been paid off that
means at this very moment the mortgage
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loan is about 50000 and $60,000 – $10,000 and now we can add up the
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liabilities that's gonna be $50,000 plus we have $10,000 so
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the final amount of liability is $60,000 we just need to deduct assets -
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liabilities that's gonna be $1,30,000 this
was it for the example on the net worth
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of the company that's it for this
particular topic if you have learned and
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