Question

What does a negative net worth indicate

Answer 1

A condition in which a company liabilites exceed its assets plus shareholders equity. Negative net worth can occur because a company borrowed too much money and subsequently had its income fall as its debt payments rose. It also may occur if the value of assets declines.

Answer 2

A negative net worth indicates the situation in which a company, person, or economic group has a large amount of debt that exceeds its assets. For example, if a company is valued at $ 1,000,000 but in turn owes debts of $ 2,000,000, it has a negative net worth of $ -1,000,000 (1-2: -1). It is the situation that leads companies to go bankrupt, since the amount of unpaid debts generates bankruptcy.