4 ms·
I thought money that was owed to you was counted as an asset, not a debt?
by cl0ckt0wer 5y ago
I thought money that was owed to you was counted as an asset, not a debt?
- thaumasiotes 5y agoIf I borrow $300,000 at 2% interest and lend it to you at 5% interest, I have an asset based on my loan to you and a liability based on my debt to whoever loaned me the same amount. They don't net out -- if you default, my asset will disappear without taking the liability with it. But it might be strange to say that I'm worth $300,000 based on my debt, when the whole concept of that debt is that it's theoretically guaranteed by, and related to, that asset. This combined situation does not suggest that I'm personally worth $300,000; I'm earning the difference in interest, and my debt to my creditor is based mostly off of your net worth, not my net worth.