Net worth: Difference between revisions
imported>Doug Williamson (Add links.) |
imported>Doug Williamson (Expand first definition.) |
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Broadly, Net worth is the value of equity, based on book values, which a borrower covenants to maintain at a minimum absolute or relative level (for the protection of the position of the lender). | Broadly, Net worth is the value of equity, based on book values, which a borrower covenants to maintain at a minimum absolute or relative level (for the protection of the position of the lender). | ||
In simple terms, the book value of equity and net worth is equal to the the book values of the borrower's total assets, less total liabilities. | |||
However, the detailed definition of Net worth for covenant compliance purposes will often be a point of negotiation between the lender and the borrower. | |||
For example, ''Tangible net worth'' excludes intangible fixed assets from the total figure. | For example, ''Tangible net worth'' excludes intangible fixed assets from the total figure. | ||
Revision as of 12:44, 4 August 2019
1. Loan documentation.
Broadly, Net worth is the value of equity, based on book values, which a borrower covenants to maintain at a minimum absolute or relative level (for the protection of the position of the lender).
In simple terms, the book value of equity and net worth is equal to the the book values of the borrower's total assets, less total liabilities.
However, the detailed definition of Net worth for covenant compliance purposes will often be a point of negotiation between the lender and the borrower.
For example, Tangible net worth excludes intangible fixed assets from the total figure.
2.
A comparable measure for an individual, often in the context of assessing 'high net worth' in the context of wealth management services.
