How to Calculate Your Tangible Net Worth & Subordinated Debt

by Sara Melone, studioD

Whether you are an individual, the head of a family, a business owner or manager, you have a net worth that is based on your assets and debts. If you need to calculate your tangible net worth and subordinated debt for the purposes of a personal or business loan application, business liquidation, estate planning or just out of curiosity, all you need to do is follow a few simple steps.

Create a list showing the value of all your assets, including cash accounts, retirement investments, stocks, bonds, mutual funds and other investments such as real estate, automobiles and collectible art. Exclude the value of any intangible assets such as intellectual property and perceived asset value from brand recognition, patents, copyrights and trademarks. These types of assets cannot be included because tangible net worth is a measure of only those assets that are considered physical in nature, according to financial information website E-Personal Finance.

Make a second list that details all of your liabilities. Include the total amounts you owe on car loans, mortgages and personal loans or outstanding invoices and business loans if you are calculating tangible net worth for your business. Add the sum of all your liabilities together, and make note of the final total.

Add up the total of any subordinated debt you may have separately from your asset and liability totals. Subordinated debt is an outstanding debt or loan that is considered secondary to other outstanding debts, notes financial and investing website Investing Answers. Typically, any issuer of subordinated debt must agree to be ranked as a subordinated debt and to be repaid in the event of bankruptcy or liquidation only after all other unsubordinated debts have been paid first. An example of a subordinated debt is a second mortgage or equity line of credit that is subordinate to the primary outstanding mortgage on a property. Review the original paperwork or consult a representative working on behalf of the creditor if you have questions about whether a debt is subordinate.

Subtract the total of your liabilities from your total assets to obtain your tangible net worth. You should also subtract the total of your subordinate debts as additional liabilities, but you may leave this figure aside if you have been advised that subordinate debts do not factor into to your tangible net worth for bankruptcy or liquidation proceedings.

About the Author

Sara Melone is a mother of three and a graduate of UNH. With prior careers in insurance and finance, photography, as well as certifications in fitness and nutrition, Melone draws directly from past experience and varying interests. She contributes with equal passion to birth journals, investment blogs, and self-help websites.

Photo Credits

  • Creatas/Creatas/Getty Images