Why is net worth compared to a financial thermometer?

Why is net worth compared to a financial thermometer?


Net worth is an objective measure of wealth, calculated as: assets minus Liabilities. The financial thermometer on the other hand objectively measures the financial position.
Net worth is compared to financial thermometer because it provides a number that can objectively measure your financial state (the wealth) and maintain a quality lifestyle during retirement and feel a sense of high financial well-being.

Answer and Explanation

Net worth is the cash which amounts when the assets exceed the liabilities. This means that all the things that you own when you subtract the debts you have this is what is considered as as Net worth. An example is that a company A has assets worth $5 and has its total debts of $2 so its net-worth will be $5-$2=$3 so $3 will be company's A Net worth. Net worth is compared as the financial thermometer basically because it helps the company or a certain firm to be able to monitor its wealth and maintain the equilibrium of its economy. It will also help them not to have more debts than the assets. This facilitates the growth of an economy.

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