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 FAQS
  1. What does negative shareholder equity on a balance sheet mean?

    N egative shareholder equity could show up on a company's balance sheet for a number of reasons, all of which should serve ... Read Full Answer >>
  2. 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. ... Read Full Answer >>
  3. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>
  4. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  5. How is the marginal cost of production used to find an optimum production level?

    The marginal cost of production can be tracked to show the optimal production level where per-unit production cost is lowest ... Read Full Answer >>
  6. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
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. Entrepreneurship

    How To Calculate Your Tangible Net Worth

    Your net worth can be calculated with a simple equation.
  3. Personal Finance

    Breaking Down The Balance Sheet

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

    American Express Returns Vs. DJ Industrial Average

    American Express has handily outperformed the Dow Jones Industrial Average since 2009, but unusual weakness in the last year is taking its toll.
  10. Fundamental Analysis

    Vice Can Be Nice: 4 Sin Stocks to Consider

    These four sin stocks are likely to be resilient during a bear market.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!