Net income is total revenues minus total expenses. If the revenues are larger, the result is net income. If the expenses are larger, the result is a net loss.
Net loss occurs when total expenses are larger than total revenues. If the revenues are larger, the result is net income.
Net working capital
Net working capital or working capital is a liquidity ratio. The formula for net working capital is net working capital = current Assets – current Liabilities.
Net working capital shows the amount of current assets the company would have if all current liabilities were paid. Current assets include cash, inventory, and receivables.
Net worth is a measure of wealth. The net worth of an individual or a household is the total of all assets minus the total of any debts.
For a company, net worth is called equity or stockholders’ equity. The formula for net worth is net worth = total assets – total liabilities (debt).
Assume Maria has a savings account of $25,000 and investments of $75,000. Her car has a fair value of $20,000. Her debts total $50,000. Maria’s net worth is $70,000. See the example below.