Question

Jasmine Smith owns a condo worth $270,000, a car valued at $30,500, and miscellaneous assets worth $11,500. She owes $179,000 on the condo and $14,000 on the car and has no other debts. Her retirement account, in which she is fully vested, contains $39,500 in mutual funds. She is insured with a $510,000 term life insurance policy. What is her net worth?

Answer 1

ANSWER

• "NET WORTH" can be simply defined as the "Surplus Assets" that exceeds the Totals debts of a Person.
• In other words we can say that ASSETS minus Libilities represents the NET WORTH.
• Concept of Net Worth can be used in the context of both the Corporations and Individuals.
• It represents the "Value" of Person/Corporation

NET WORTH = ASSETS (-) LIABILITIES

= { Condo + Car + Misc Assets + Mutual Funds } - { Owing on Condo + Owing on Car }

= { 270000 + 30500 + 11500 + 39500 } - { 179000 + 14000 }

= { $ 351500 } - { $ 193000 }

= $ 158500

{ NOTE :Sum Insured under Insurance Policy is Neither an Asset nor a Liabilty. However premium paid on such policy is an Expense and in case of any advance premium, it is then treated as Current Asset }