Your debts and assets often are used to determine your financial health. You are in good financial shape if your have more assets than debts, so you should strive to pay down your debts and build up your assets.
Assets
Your assets are anything of value that you own, including cash in the bank, stocks, bonds, 401k, the equity in your home and car, as well as other valuables. Assets for a company can be cash, accounts receivable, and property and equipment.
Debts
Your debts, or liabilities, include any money that you owe, such as the balance on your mortgage or car loan, college loans, credit card balances and any other money you owe. If you can't pay your debts, you are insolvent.
Net Worth
You can determine your net worth by adding up all your assets and subtracting all your debts. What you have left is your net worth.
Considerations
Many mortgage companies will not approve you for a mortgage if you have too much debt relative to your assets and your income.
Bankruptcy
If you file for bankruptcy, you will have to disclose all your assets and debts, for review by the bankruptcy trustee.
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