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Chapter 2. Accounting 101 > Equity: What Your Company Is Worth

Equity: What Your Company Is Worth

When describing different types of accounts, the term net worth is often applied to the sum of a company’s equity accounts. If you add up all the value of the company’s assets (items that the company owns), and then subtract the company’s liabilities (amounts owed to others), what you are left with is the net worth of the company, or its equity.

Sometimes, the equity that appears on your financial statements seems understated compared to what you know the company is worth. See “Equity and Actual Net Worth” in the “Troubleshooting” section at the end of this chapter for an explanation of the difference between the balance sheet account and the true net worth of a company.



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