Net worth is best described as which of the following?

• A. Cash flow from operating activities.
• B. Current income level.
• C. Assets minus liabilities.
• D. Total assets plus liabilities.

Answer: (C)

Net worth captures your financial position at a moment in time by showing how much wealth remains after you settle all obligations. The best description is assets minus liabilities. Assets are things you own that have value—cash, investments, real estate, cars, and other valuables. Liabilities are debts you owe—loans, mortgages, credit card balances. Subtracting liabilities from assets gives your net worth, which can be positive, negative, or zero depending on whether your assets exceed your debts.

This is different from cash flow or income, which measure money moving in and out over a period rather than the accumulated value at a single point in time. For example, if you have $300,000 in assets and $150,000 in liabilities, your net worth is $150,000.