What is 'net worth' and explain its significance?
CS Professional · Banking - Law and Practice · PYQS · June 2015
What is 'net worth' and explain its significance?
Answer & Explanation:
'Net Worth' represents the amount that belongs to the owners of the firm. In true sense, equity shareholders are the real owners of the firm. Paid up share capital, general reserves, capital reserves, share premium and balance lying in Profit and Loss Account, totally, constitute net worth. Preference share capital amount is also included in net worth. It also provides a cushion available to the outside creditors of the firm.
Topics: Banking Concepts
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