What does a negative net worth indicate?

Accounting Dec 17, 2020

Expert Solution

A negative net worth indicates that a business has more debt than equity and indicates that a sale today of all the assets of the business would fail to fulfill its debt obligations. Net worth gives you a snapshot of a business though, and a business with a great profit model can change that net worth figure rapidly. Conversely, a business with a positive net worth can quickly find itself with a bad model facing bankruptcy.

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