How is an individual's net worth calculated?

• A. total assets plus total liabilities.
• B. total assets minus total liabilities.
• C. liabilities minus assets.
• D. assets minus income.

Answer: (B)

Net worth shows your ownership position at a single point in time, equal to what you own minus what you owe. So, net worth is assets minus liabilities. For example, if you have assets worth $600,000 and liabilities totaling $350,000, your net worth is $250,000. The other ideas don’t fit because adding liabilities to assets would give a total resources figure, not net worth; subtracting assets from liabilities would give the opposite of net worth; and subtracting income (a flow) from assets mixes a dynamic flow with a stock measure, which isn’t how net worth is determined.