Net worth: Difference between revisions
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''Loan documentation''. | 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). | 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 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. | ||
2. ''Individual finances.'' | |||
A comparable measure for an individual, often in the context of assessing 'high net worth' in the context of wealth management services. | |||
3. ''Organisations.'' | |||
A comparable measure for any organisation or other entity. | |||
== See also == | == See also == | ||
* [[Assets]] | |||
* [[Covenant]] | * [[Covenant]] | ||
* [[Equity]] | |||
* [[High net worth]] | |||
* [[Interest]] | |||
* [[Liabilities]] | |||
* [[Net assets]] | |||
* [[Tangible net worth]] | * [[Tangible net worth]] | ||
* [[Ultra high net worth]] | |||
* [[Very high net worth]] | |||
* [[Wealth]] | |||
* [[Wealth management]] | |||
[[Category:Corporate_finance]] | |||
[[Category:The_business_context]] | |||
Latest revision as of 06:26, 9 February 2024
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 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. Individual finances.
A comparable measure for an individual, often in the context of assessing 'high net worth' in the context of wealth management services.
3. Organisations.
A comparable measure for any organisation or other entity.
