Certified Paraoptometric (CPO) Practice Exam 2025

How is 'Net Worth' determined?

1. The amount of cash a business has at hand

2. The total value of a business

3. The total revenue minus expenses

4. The assets that have been invested back into the business

The correct answer is: The total value of a business

The determination of 'Net Worth' is fundamentally based on the total value of a business. This metric is calculated by subtracting total liabilities from total assets. Thus, it reflects what the business is truly worth after accounting for what it owes. When considering 'Net Worth' in this context, thinking about it as the total value provides a clear picture of the financial health of a business. It shows how much equity the owners have in the business and can be understood as a snapshot of the company’s financial standing at a specific moment in time. The other options don't accurately represent the concept of 'Net Worth'. For instance, merely considering the amount of cash on hand doesn't encompass all the valuable assets and liabilities. Total revenue minus expenses relates to profitability rather than overall value. Lastly, while assets reinvested into a business contribute to its value, this alone doesn't capture the complete picture of total worth as it excludes other factors such as debts.