Future Business Leaders of America (FBLA) Personal Finance Practice Test

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How is net worth calculated?

  1. Income plus assets

  2. Assets plus liabilities

  3. Assets minus liabilities

  4. Liabilities minus assets

The correct answer is: Assets minus liabilities

Net worth is calculated by subtracting liabilities from assets. This formula provides a clear picture of an individual's financial health. Assets represent everything that you own that has value, such as cash, investments, real estate, and personal property. Liabilities, on the other hand, encompass all debts and obligations, such as loans, mortgages, and credit card debts. When you subtract liabilities from assets, you are effectively determining what you truly own after accounting for what you owe. A positive net worth indicates that assets exceed liabilities, whereas a negative net worth means that liabilities are greater than assets. This calculation is essential for understanding financial stability and planning for the future.

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