What is Tangible Net Worth
Tangible net worth is a measure of a company’s value that excludes intangible assets such as intellectual property. Tangible net worth is also known as tangible equity or tangible shareholders’ equity.
Most companies have intangible assets and liabilities, which are difficult to value. Intangible assets include patents and copyrights, while trademarks and goodwill count as intangible liabilities. Because of the difficulty in valuing intangible assets, investors can use tangible net worth to get a more accurate picture of a company’s financial position.
The formula for calculating tangible net worth is:
Total Assets – Intangible Assets – Accumulated Amortization = Tangible Net Worth
Your net worth is a multi-faceted component of your overall financial situation
Your net worth is a multi-faceted component of your overall financial situation. It is not only the sum of your assets (what you own) and liabilities (what you owe), but also how you measure your financial health at a given moment in time. You calculate your net worth by subtracting your liabilities from your assets.
In personal finance, tangible assets are items of value that can be physically touched — think real estate properties, gold or other precious metals, collectibles, and so on. Tangible net worth is simply the total value of all these items.
Should you focus on increasing your tangible or intangible net worth?
There are two types of net worth: tangible and intangible. Tangible net worth is quite simple to calculate — just add up the values of all your assets that can be easily quantified. Intangible net worth is harder to define because it encompasses things like human capital (your ability to earn money over time), brand equity (the value of your good reputation), and intellectual property (your ideas or inventions).
You may be wondering which type of net worth you should focus on increasing. That’s a good question; it depends on what your goals are. If you need money right now, you’ll want to focus on increasing your tangible net worth by selling some of your assets or earning more money with a second job or side hustle
Intangible assets include patents, copyrights and trademarks that have economic value. These assets can be converted to cash — for example, a patent can be licensed or sold — but it’s more difficult than selling a house or a car.
Your intangible net worth also can include things like business contacts or personal relationships that could be used to help you get a job or start a business.