https://www.globalbankingandfinance.com/how-real-estate-companies-can-model-their-way-to-accurate-cash-flow-forecasting/Making a precise estimate of your net worth will turn out to be highly important when you intend to convert your vital assets into liquid cash.
Your net worth can come real handy at times of your fiscal needs. If you have to speak technically, it is the precise distinction between your liabilities as well as your assets (complete value of your own assets) which decides the actual net worth of the property you own. If you have to measure the strength of your personal wealth, then knowing your net worth would be the most instrumental aspect in deciding the accurate values and rates, which would be levied on your fundamental assets.
What is net worth?
The net worth of your property or your asset helps you to understand whether the existing value of your property is going to increase or decrease. With this quintessential net worth you can actually measure whether you are on the way of financial progress.
Why should you consider Net worth?
- It assists you immensely as you make up your mind to sell out your property at a standard rate.
- It is integrated with your personal wealth. Increase in your net worth means your personal wealth is also increasing.
- It helps you a lot to decide whether you are on the track of financial progress.
Divergent facets of your net worth
Your net worth is going to be assessed on the basis of various types of assets that you own.
- Your personal asset- Your personal asset and your net worth happens to be integrally associated. These assets can vary. They can be your flat or apartment, your jewels, your furniture etc. They are to be included in the inventory of your personal asset as you are going to grab their resale value.
- Business assets- Business assets are also known as equity. You would definitely like to include them in the list of items which would eventually decide your crucial net worth. Business assets of yours would include your commercial space as well as all the inherent products or features of that place.
While thinking of your business assets as the distinguishing features of your own net worth, you should focus on two crucial aspects. One is the market value of your business asset and the other is the accounting value of your Business Assets.
- Receivable loans- If you have given any loan to your near and dear ones or to your friends, you can choose to include them in your personal net worth. You need to incorporate them in the inventory only when you have the assurance that they are going to be collected by you, for sure.
- Liquid assets- It is a crucial aspect of your net worth as well as personal finance. It consists of treasure bills, deposits, funds etc.
How do you figure it out?
There is a particular mathematical or equation process, which you need to follow to figure out your net worth-
- Your assets need to be enlisted in the first place
- The value or prospects of these assets should be calculated approximately to get a ballpark figure
- Outstanding balances are to be figured
- Liabilities are to be enlisted
- Liabilities are to be subtracted from the assets which you happen to own
Once these steps are enacted you get your value or net worth figured.