Florida General Contractor Practice Exam

When calculating net worth, which two financial figures are primarily compared?

1. Total assets and total liabilities

2. Revenues and expenses

3. Current assets and income

4. Equity and debt

The correct answer is: Total assets and total liabilities

Calculating net worth involves determining the difference between a person’s or organization’s total assets and total liabilities. Total assets represent everything that a person or entity owns, including cash, real estate, investments, and personal property. Total liabilities, on the other hand, encompass all debts and financial obligations, such as loans, mortgages, and unpaid bills. The formula for net worth is simple: Net Worth = Total Assets - Total Liabilities. This equation reveals what is owned after accounting for what is owed, providing a clear snapshot of financial health. Thus, when evaluating net worth, the direct comparison of total assets to total liabilities serves as the fundamental assessment of wealth. The other options revolve around different financial concepts: revenues and expenses pertain to income statements, current assets and income mix balance sheet and income statement elements, and equity and debt relate to aspects of financing and investment rather than the overall calculation of net worth.