What is pure wealth?

Also known as pure assets, pure wealth is the total value of the assets owned by individuals, companies or other type of organization, less any current obligations. The aim of most businesses and households is to generate positive net wealth, which means that the total value of the asset exceeds the total amount of debt currently owed. There are some slight differences in how net assets or wealth are recorded in different environments, although the basic formula applies to individuals and business entities.

For the calculation of pure wealth, it is first necessary to determine the value of the activated entities. In many cases, this means considering the current market value of the assets concerned, allowing factors such as depreciation. In individual accounting records of individuals, the value or value of assets is recorded directly as this current market value. For businesses, the asset is usually listed as the original purchase costs and at the same time identifies the depreciation amount increased from the purchase.

Once all assets are determined, the next step is to identify the total amount of liabilities currently owed by individuals or society. For households, this often means any outstanding credit card debt, car loans and mortgages, and any accounts or cards that are currently operated in local stores. Businesses would also include any outstanding balances due to real estate, equipment or any receivables that have been declared irreparable, but are still reflected in business records and have not been written as a bad debt.

After determining the amount of assets and obligations associated with an individual or company, the calculation of pure wealth is very simple. By deducting the total obligations from the total assets, identifying the current level of pure wealth can be held by the entity. Ideally, the total AK isTiva higher than the total obligations, indicating that clean assets or wealth is positive. In the event that the total obligations are larger than the total assets, pure assets or wealth of the subject are considered negative.

Increasing pure wealth usually includes a dual process of delaying the takeover of further debt, as well as the settlement of the current debt and finding ways to increase the value of the activation at the same time. For example, if a household currently has a net wealth of $ 50,000 in the US (USD), which reflects $ 10,000 debt on credit card, repayment of credit card balances, and decide to make additional purchases, will increase the net assets of this household to $ 60,000. Assuming that the household owns shares in one other company that generates $ 5,000 in dividends over the same period, pure wealth increases from the original value of $ 50,000 to $ 65,000.