Tangible net worth

What is it: Tangible net worth is one way to measure the liquidation value of an ongoing business.

What's the calculation: Total assets - Intangible Assets - Total Liabilities,

Intangible assets include goodwill, copywrites, patents and similar non-physical assets.

Who cares about tangible net worth? Primarily lenders, and particularly your traditional banker (which means you will care if you need a business loan). Tangible net worth is a fairly standard covenant included to make sure the bank has sufficient coverage (protection) in the event of default.

The level of tangible net worth required by a lender varies as a function of the particular company and the borrowing request. Because it's not a ratio, there is no standard number, but having little-to-no tangible net worth will make it next to impossible to borrow from the more traditional and conservative banks.