Adjusted Net Worth
Adjusted Net Worth is a measure of the net worth of a company adjusted for various items.
Adjusted net worth is an adjusted balance sheet that removes certain items that are not truly representative of the ability of the company to generate cash for its owners (which is what net worth represents).
Items removed from the balance sheet include intangible assets, surplus assets, and minority interest in equity. Sometimes items like patents, goodwill, investments in other companies, and capitalized leases will also be removed.
It measures the value of a business after taking into account the risk and time value of money. It also takes into account the difference in an operating cycle between the firm and its choice of financing.
How to calculate Adjusted Net Worth?
Adjusted net worth is calculated by first subtracting the difference between the book value of the firm’s assets and their current market value from net worth. The resulting figure is then used to calculate the adjusted net worth to total assets ratio, which is a measure of financial risk.
The adjusted net worth-to-total asset ratio is calculated as follows:
(Net Worth – (Current Market Value of Assets – Book Value of Assets)) / Total Assets
What is risk adjusted net worth?
Adjusted net worth is a modified version of your net worth, which is the total value of your assets minus your liabilities. Adjusted net worth is calculated by removing riskier assets, such as stocks or real estate, and adding in safer, less volatile investments like bonds.
The result is a measurement that can be used to assess an investor’s ability to withstand market downturns.
Adjusted Return on Net Worth
Adjusted return on net worth is an investment metric that adjusts the return on net worth for changes in the company’s working capital and long-term debt.
It’s often used to compare the performance of different companies or to determine whether a company’s most recent performance is due to its capital structure or other factors.
Adjusted return on net worth (ARNW) is a financial performance metric used to measure how efficiently a company has allocated its capital and assets to generate returns.