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. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  2. Breaking Down The Balance Sheet
    Personal Finance

    Breaking Down The Balance Sheet

  3. How To Calculate Your Tangible Net Worth
    Entrepreneurship

    How To Calculate Your Tangible Net Worth

  4. How Mortgage Refinancing Affects Your ...
    Credit & Loans

    How Mortgage Refinancing Affects Your ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center