Understanding Net Worth

What is the formula to calculate net worth?

• Assets + Liabilities

• Assets - Liabilities

• Liabilities - Assets

• Assets / Liabilities

Which of the following is considered an asset?

• Credit card debt

• Car loan

• Savings account

• Mortgage

What is a liability?

• Money owed to others

• Cash in hand

• Value of your house

• Investments in stocks

Why is it important to have a personal net worth statement?

• To track your debts only

• To measure your financial progress

• To calculate your annual taxes

• To list your expenses

Which of the following can increase your net worth?

• Taking out a new loan

• Paying off existing debt

• Buying items that depreciate quickly

• Renting a home

How does investment in education typically affect your net worth in the long term?

• Decreases due to student loans

• Increases due to higher earning potential

• No impact

• Decreases due to time spent not working

What is the impact of inflation on net worth?

• Increases net worth by increasing the value of assets

• Decreases net worth by reducing the value of money

• No impact on net worth

• Increases net worth by reducing the value of liabilities

How should a personal net worth statement be organized?

• List assets and liabilities randomly

• List assets first, then liabilities

• Only list assets

• Only list liabilities

What is the purpose of setting financial goals in relation to net worth?

• To ensure you spend all your money

• To guide your budgeting and saving decisions

• To make sure you have enough liabilities

• To calculate how much tax you owe

Why is budgeting important for managing net worth?

• It helps you to spend more money

• It has no impact on net worth

• It helps you control your spending and increase savings

• It only helps to track expenses