Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What term describes the total value of a person's assets after subtracting liabilities?

1. Net gain

2. Net worth

3. Equity balance

4. Asset valuation

The correct answer is: Net worth

The term that accurately describes the total value of a person's assets after subtracting liabilities is "net worth." This financial metric provides a clear picture of an individual's financial health by illustrating what they truly own versus what they owe. To calculate net worth, one adds up all assets—such as cash, investments, real estate, and personal possessions—and then subtracts liabilities, which include debts like loans, credit card balances, and mortgages. The resulting figure represents the amount that a person would have if they were to liquidate their assets and pay off all debts. In contrast, the other terms listed do not effectively capture this concept. "Net gain" typically refers to the profit received after all expenses are deducted, which can apply to specific transactions rather than a comprehensive assessment of assets and liabilities. "Equity balance" often relates to ownership in particular assets or properties and may not reflect total overall financial standing. "Asset valuation" pertains to determining the market value of specific assets and does not account for liabilities, thus failing to provide a holistic view of a person's financial condition.