Finance: What is Net Worth?

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.

College and CareerPersonal Finance
CoursesFinance Concepts
FinanceFinance Definitions
Financial Responsibility
Personal Finance
Finance and EconomicsTerms and Concepts
LanguageEnglish Language
Life SkillsFinance Definitions
Personal Finance
SubjectsFinance and Economics
Terms and ConceptsAccounting
Careers
Company Management
Financial Theory
Metrics
Retirement
Tax
Trusts and Estates
Wealth

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]