Asset
Anything you own that has monetary value. Assets put money in your pocket (investments) or can be sold for cash. In the context of net worth, even your shoes are technically assets, but we usually only count items with significant resale value.
Liability
Any debt or financial obligation you owe to another party. Liabilities take money out of your pocket. This includes formal debt (bank loans) and informal debt (money borrowed from parents).
Liquid Net Worth
A stricter measure of wealth. It is calculated as (Cash + Liquid Investments) - Liabilities. It excludes "locked" assets like real estate or retirement funds (EPF) that you can't access immediately during an emergency.
Solvency Ratio
Calculated as Total Assets / Total Liabilities. A ratio greater than 1 means you are solvent (you can pay off all debts). A ratio less than 1 means you are technically insolvent (bankrupt).
Appreciating vs. Depreciating Assets
Appreciating Assets increase in value over time (e.g., Real Estate, Stocks, Gold). Depreciating Assets lose value over time (e.g., Cars, Electronics, Furniture). A healthy net worth is built on appreciating assets.
Equity
The portion of an asset that you truly own. If your home is worth ₹50 Lakhs and you have a loan of ₹30 Lakhs, your equity is ₹20 Lakhs. Net worth is essentially the sum of all your equity.
Inflation-Adjusted Net Worth
The "real" value of your wealth. If your net worth grows by 5% but inflation is 6%, your purchasing power has actually decreased. Always aim for growth that beats inflation.