Your Asset Worksheet: Liabilities
You're not done yet with your Asset Worksheet. To learn your total net worth you also need to document your liabilities. Liabilities are what you owe to others. If you buy something on credit, the something is an asset and the credit is the liability.
The basic financial equation is Assets – Liabilities = Net Worth. Put another way: your financial worth is what you own less what you owe. You've used this formula if you've calculated home equity (Market Value – Mortgage = Equity). And you will use this formula many times as you build your business.
What are your personal liabilities?
Credit card balances
Outstanding medical bills
Alimony or child support
If you owe money to someone else, it is a liability whether or not you still own the asset purchased. These and other liabilities must be deducted from your assets to arrive at your net worth. Remember, these calculations are for you personally, not the business. You're trying to determine how much you can invest in a retail store. Completing this section of your Asset Worksheet will help you do that. The Asset Worksheet totals may or may not be adequate (you'll determine actual start-up and operating costs in Chapters 5 and 6), but it will give you a good idea of whether you have the financial and personal assets needed to invest in the retail store you've chosen. And it can help you identify which assets you need to build before you begin.
ASSETS WORKSHEET, CONTINUED LIABILITIES