Deficit Net Worth

AAA

DEFINITION of 'Deficit Net Worth'

A scenario in which liabilities are higher than assets. Deficit net worth can occur for a variety of reasons, but typically it arises when current or future asset values erode unexpectedly. For example, when home values fall, often one is left owing more on their mortgage than the home is presently worth. Likewise, in frontier days, land and property often gained or lost value suddenly depending on where the nearest railroad was located. Also known as negative net worth.

INVESTOPEDIA EXPLAINS 'Deficit Net Worth'

A negative, or deficit, net worth does not necessarily imply bankruptcy. Just as quickly as asset values can plunge, they can also rise. However, a deficit net worth can negatively influence future financing opportunities and stifle future business growth.  If you'd like a tool to determine if you're experiencing a negative net worth you can use our free Net Worth Tracker which allows you to calculate, analyze and record your net worth for free.

RELATED TERMS
  1. Operating Loss - OL

    The net loss recorded as a result of a company's unprofitable ...
  2. Asset Deficiency

    A situation where a company's liabilities exceed its assets. ...
  3. Total Liabilities

    The aggregate of all debts an individual or company is liable ...
  4. Effective Net Worth

    The shareholders' equity of a corporation, plus subordinated ...
  5. Adjusted Net Worth

    A method for valuing an insurance company using capital values, ...
  6. Net Asset Value Per Share - NAVPS

    An expression for net asset value that represents a fund's (mutual, ...
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. Entrepreneurship

    How To Calculate Your Tangible Net Worth

    Your net worth can be calculated with a simple equation.
  4. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  5. Professionals

    Warning Signs Of A Company In Trouble

    Don't let your clients go down with ship! Learn how to escape sinking with these tips.
  6. Budgeting

    Common Liabilities That Hurt Your Net Worth

    Every penny that you keep out of the liability side of the net worth equation essentially ends up on the asset side.
  7. Options & Futures

    Understanding Financial Liquidity

    Understanding how this measure works in the market can help keep your finances afloat.
  8. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  9. Investing

    Can a stock have a negative price-to-earnings (P/E) ratio?

    Yes, a stock can have a negative price-to-earnings ratio (P/E), but it is very unlikely that you will ever see it reported. Although negative P/E ratios are mathematically possible, they generally ...
  10. Investing

    What does negative shareholder equity on a balance sheet mean?

    Negative shareholder equity could show up on a company's balance sheet for a number of reasons, all of which should serve as red flags to look much closer before investing. To understand why, ...

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center