The Difference Between Net Worth and Market Value

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Net worth and market value both relate to the value of a business, or the value of an investor's share of ownership in a business. The primary difference is that net worth is an accounting value, whereas market value is the actual amount someone is willing to pay for the business.

Net Worth Basics

To calculate a company's net worth, you subtract its liabilities from its assets. If total assets equal $750,000 and total liabilities equal $500,000, net worth is $250,000. Another perspective is that net worth is what remains after all liabilities are paid for after asset liquidation. Net worth is also known as owners' equity, or the book value of owner capital invested in the company. For an individual investor, net worth is the value of his current ownership stake.

Market Value

A company's market value is the highest projected amount a buyer is willing to pay for the company at the present time. The market value is likely $500,000, for instance, if that is the highest amount a ready, willing and able buyer offers over an extended period of time. Real estate professionals and other business valuation experts use various financial formulas to estimate market value of a company prior to its listing for sale.

References

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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