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Calculating your tangible net worth

29 March 2013 by National Bank
Calculating your tangible net worth

Your tangible net worth is equal to the value of all of your assets, minus any liabilities and intangible assets you may own.

As outlined in an  Investopedia  report, while a basic net worth calculation may suffice for most people, those holding copyrights, patents or other intellectual property rights may need to calculate their  tangible net worth .

Tangible net worth, like basic net worth, takes your assets and liabilities into account, but goes one step further by subtracting the value of intangible assets including goodwill, copyrights, patents and other intellectual property.

When applying for a loan, a lender may require a tangible net worth in order to provide a clearer picture of the assets that can be liquidated in the event of a loan default.

Tangible assets can include:

Intangible assets can include:

The dot-com era drew attention to the need to properly account for intangible assets, revealing large discrepancies between balance sheet figures and true market values.

Intangible asset valuation begins with the following considerations:

As with any net worth calculation, accurate values are critical, so most individuals and businesses will turn to qualified professionals in order to determine the value of their intangible assets.

  • Cash;
  • Real property (land and homes);
  • Personal property (cars, boats, furniture, jewelry, etc.).
  • Goodwill;
  • Copyrights;
  • Patents;
  • Trademarks;
  • Intellectual property.
  • Why is the asset being valued? (Financial reporting, bankruptcy, litigation, etc.);
  • What is the asset?
  • How will the asset be used in the future?
  • Who could buy the asset?

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