In the corporate world, the net worth of a company refers to its overall valuation as on a particular date and time. Contrary to popular belief, calculating the net worth of a business enterprise is not as difficult as most people may think. This calculation is applicable to a variety of business entities like sole proprietorships, partnership firms, large corporate enterprises and a variety of other forms of businesses. It is imperative for corporate executives, proprietors, partners and other business leaders to understand and appreciate that the net worth of a business enterprise is always subject to change. The net worth of a particular business is true only at a particular point of time.
Steve Sorensen, a prominent financial consultant cum business investment strategist from USA and the founder of Enlighten 360 points out the net worth of a corporate enterprise provides its investors and other interested stakeholders a quick picture of the financial strength of the company. He and along with team of competent investment strategists, have been instrumental in helping many successful large, medium and small companies with their investment planning and enhancing their net worth. The Steve Sorensen Networth team of financial experts are renowned throughout the United States for their expertise, knowledge and skill when comes to enhancing the business wealth of his corporate clients. His clientele also includes a number of prominent and richest Fortune 500 companies.
He explains that the net worth of a company essentially indicates how much the business enterprise is worth if it went into liquidation, cease all its business activities and settled its accounts. With the help of a simple formula, it is possible to calculate the net worth of a corporate enterprise but to estimate this figure correctly, it is essential to analyze the financial statements of the enterprise. The net worth of a corporate enterprise is the difference its total liabilities and accumulated value of its total assets. The calculation of the net worth of a corporate enterprise comprises of the following steps:
Calculate the total value of the corporate enterprise’s assets. Current assets include cash or cash equivalents, short-term investments, accounts receivable and other assets that can are easily convertible into cash within a period of less than twelve months. Long-term assets, on the other hand, include real estate properties, inventory, equipment and other assets that are subject to depreciation or amortization. In the calculation of the net worth of company, it is imperative to use only the current value of long-term assets, which is equal to the market value of such assets or difference between the original cost of the asset and its accumulated depreciation.
In this step, add up the total value of the corporate enterprise’s short liabilities and long term liabilities. Accounts payable and short-term loans fall under the category of current liabilities. Only long-term liabilities include mortgage loans that the company repays in more than one accounting year.
Subtract total liabilities from total assets. The resulting figure is the net worth of the corporate enterprise.
The Steve Sorensen Networth team of financial experts says that above calculation is the overall value of a company as on a specific date.