What does net worth signify in financial terms?

Net worth in financial terms signifies the difference between the total value of an individual's assets and the total value of their liabilities. This measure is critical because it provides a snapshot of an individual’s financial health at a specific point in time. When you calculate net worth, you take all your valuable assets—like cash, real estate, investments, and personal property—and subtract your total liabilities, including debts, loans, and any other financial obligations. The resulting figure represents what you truly own, and it is often used to assess financial stability and progress towards long-term financial goals.

The other options represent different financial concepts: total income minus total expenses refers to cash flow, which is different from net worth as it measures the inflow and outflow of money over a period. The value of assets plus value of liabilities does not make sense in determining net worth, as combining these figures does not provide a helpful financial insight—rather, it misrepresents the calculation of an individual's financial situation by not accounting for liabilities appropriately. Net profit from investments refers to returns on investments rather than an individual’s overall financial standing, focusing specifically on how much money has been gained or lost through investment activities. Overall, the correct identification of net worth as the value of all assets minus