Tangible net worth is defined as?

• A. Total equity minus intangible assets.
• B. Total assets minus total liabilities.
• C. Cash and cash equivalents minus current liabilities.
• D. Net income minus taxes.

Answer: (A)

Tangible net worth reflects the portion of a company’s net worth that is backed by tangible, physical assets. It removes non-physical values like goodwill, patents, and trademarks from the equity base because those intangibles aren’t as reliably realized in liquidation or used as collateral.

The standard way to measure it is total equity minus intangible assets. This is equivalent to taking total assets minus total liabilities minus intangible assets, which isolates the value supported by tangible assets only. For example, if equity is 2,000 and intangible assets total 600, tangible net worth is 1,400.

This is why subtracting intangible assets from total equity is the best definition for tangible net worth. The other options describe different measures: total assets minus total liabilities gives equity but still includes intangibles in the broader sense, cash minus current liabilities is a liquidity metric, and net income minus taxes is a profitability measure.