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Finance: What is Net Worth? 185 Views
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What is net worth? You own $100,000,000 worth of Coke stock. That's the good news. Unfortunately, you also have $90,000,000 in debt. Your net worth is $10,000,000.
- Social Studies / Finance
- Finance / Financial Responsibility
- Life Skills / Personal Finance
- Finance / Personal Finance
- Courses / Finance Concepts
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- College and Career / Personal Finance
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Accounting
- Terms and Concepts / Careers
- Terms and Concepts / Company Management
- Terms and Concepts / Financial Theory
- Terms and Concepts / Metrics
- Terms and Concepts / Retirement
- Terms and Concepts / Tax
- Terms and Concepts / Trusts and Estates
- Terms and Concepts / Wealth
Transcript
- 00:03
Finance a la shmoop what is net worth?
- 00:07
well net worth refers to the value of something like if you have 10 million
- 00:11
bucks in assets and 2 million in debt your net worth is 8 million 10 months -
- 00:17
bigger example you're a wealthy real estate mogul different kind of mogul [person skiing down a mountain]
- 00:22
this kind you have 3 billion dollars worth of buildings so how do we know
Full Transcript
- 00:26
there were 3 bill well we have a bevy of active buyers willing to pony up cash [buyers cuing up to buy a building]
- 00:30
for the marquee trophy real estate between 5th and central park we also
- 00:35
know it's worth this much just by using a discounted cash flow analysis anyway
- 00:39
the buildings show profits of 200 million bucks a year and the going rates [Building with a fore sale sign of 3 billion dollars]
- 00:43
for these buildings is about 3 billion or 15 times that unleveraged number
- 00:49
there's a new term unleveraged well unleveraged means that the buildings [a bird swooping into the buildings window]
- 00:54
carry no debt which is unusual for real estate because with such steady
- 00:59
recurring predictable revenues and profits on long term leases there are
- 01:04
generally good candidates for taking on lots of relatively cheap debt you know [A building being compressed by debt]
- 01:09
in banks generally like lending to real estate projects so the three billion
- 01:13
gross or total worth of these buildings is the net worth as well because there's [Dollar signs raining from the sky onto the buildings]
- 01:17
no debt to subtract they're unleveraged but what if the mogul decided he wanted
- 01:22
to buy 2 billion dollars worth more of buildings and he decided to pledge his [mogul attempting to buy more buildings]
- 01:28
existing unleveraged 3 billion dollars worth of building as collateral so he
- 01:34
can take out loans that are bigger right well then he went to Vegas put all 2 [Mogul with a wheelbarrow of cash gambling in vegas]
- 01:38
billion on 17 black and lost well the good news he just made a lot of new
- 01:43
friends at that casino the bad news well he's lost a whole 2 billion and he still [Mogul losing 2 billion dollars on the roulette]
- 01:48
has to pay it all back his net worth just went down to 1 billion because you
- 01:52
take the 3 billion dollar value of his real estate subtract the 2 billion in
- 01:56
loans he still has to pay off now and yeah we know he never bad on [White roulette ball landed in 17 black]
- 02:00
everything's everything black but this guy did and well you know the dance [Owner of the casino victory dancing in front of the mogul]
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