Net Worth Practice

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What is a liability?

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A liability is a financial obligation or debt that a person or organization owes to another party. Examples include loans, mortgages, and credit card debts.

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What are assets?

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Assets are monetary resources or items of value that a person or organization owns. Examples include cash, real estate, stocks, and personal property.

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How do you calculate Net Worth?

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Net Worth is calculated by subtracting total liabilities from total assets. Net Worth = Total Assets - Total Liabilities.

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What is an example of a liability?

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An example of a liability is a mortgage, which is a loan taken out to purchase property.

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What is an example of an asset?

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An example of an asset is savings in a bank account.

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If you have $10,000 in assets and $4,000 in liabilities, what is your Net Worth?

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Your Net Worth would be $6,000 ($10,000 - $4,000).

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What does it mean if your Net Worth is negative?

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A negative Net Worth means that your liabilities exceed your assets, indicating financial instability.

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What is the difference between current assets and long-term assets?

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Current assets are assets expected to be converted into cash within a year, while long-term assets are held for more than a year.

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What is an investment account?

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An investment account is a type of account where individuals can buy and sell securities like stocks and bonds to grow their wealth.

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What is the significance of knowing your Net Worth?

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Knowing your Net Worth helps you understand your financial health and make informed decisions about spending, saving, and investing.