How is Total Value of Ownership calculated?

Total Value of Ownership is calculated by taking the total assets of a business and subtracting its total liabilities. This calculation gives a clear picture of the net worth of the entity, which is essentially the value that shareholders would theoretically own if the business were to settle all its liabilities.

By using the assets minus liabilities approach, you can determine how much value remains for the owners after all debts have been paid. This measurement is critical for both owners and potential investors as it reflects the true financial health of the business. It essentially answers the question of what the business is worth from an ownership perspective, as it highlights the equity that is attributable to the business owners after accounting for all obligations.