Net Assets Calculator

Net Assets

The term net assets refer to the difference between assets and liabilities of the company. This concept is generally used to value the company. It determines the worth of the company and hence, it is used in various valuation methods. Any amount paid over and above this value is the goodwill of the company. This net assets calculator will help you to calculate the value of the net assets of the company.

Net assets of the company determine the financial health of a company. Positive net assets mean the company is financially sound while negative net assets indicate the situation of the financial crisis in the company.

Formula

The formula for calculating net assets is as follows:

Net Assets = Total Assets – Total Liabilities

The above formula can be simplified as below:

Net Assets = Fixed Assets + Current Assets – (Non-Current Liabilities + Current Liabilities)

Net Assets Calculator

Calculator

How to Calculate using Net Assets Calculator?

You simply have to provide the following data into the net assets calculator.

Fixed Assets

Fixed assets are those assets held by the company for a longer duration with a purpose to utilize them for generating revenues. We need to enter the net value of such assets, i.e., the value after deducting the depreciation amount.

We can also use our calculator for calculating net book value – Net Book Value Calculator

Current Assets

Enter the amount of current assets held by the company. These are the assets that a company holds for a period of less than 12 months. It includes inventory, trade receivables, cash & cash equivalents and other current assets.

Non-Current Liabilities

Enter the amount of non-current liabilities. These are generally long-term liabilities not maturing within 12 months.

Current Liabilities

These are the short-term liabilities of the company maturing within a period of 12 months. These include trade payables, outstanding payments, etc.

Example

Let us take an example to grab better command on this concept.

Assume that X Inc. is a manufacturer of toys and its balance sheet comprises of the following:

Sundry Debtors – $2,000

Inventory – $1,750

Cash & Cash Equivalent – $1,500

Fixed Assets – $6,000

Current Liabilities – $2,500

Long-term Loan – $7,500

Net Assets of X Inc.-

Total Current Assets = $2,000 + $1,750 + $1,500 = $5,250

Total Fixed Assets = $6,000

And, Total Current Liabilities = $2,500

Total Long-Term Liabilities = $7,500

Hence, Net Assets = ($5,250+$6,000) – ($2,500 +$7,500)

= $11,250 – $10,000 = $1,250

Here, the net assets of the company are positive which means that the company has enough assets to pay off its liabilities.

We compare this amount of net assets with the earnings of the company to check the returns generated by the company against its net assets invested by the company. This ratio is known as return on net assets. This ratio can tell us a lot about whether the company is effectively and efficiently utilizing its assets or not. A lower return ratio means the company needs to deep dive and remove the bottleneck and do all that to improve this ratio. Moreover, if this return is lesser than the cost of capital then the company seems to be facing a severe crisis and will continue to incur losses till this ratio improves.

Help us make this article better
Share Knowledge if you liked
Sanjay Borad

Sanjay Bulaki Borad

Sanjay Borad is the founder & CEO of eFinanceManagement. He is passionate about keeping and making things simple and easy. Running this blog since 2009 and trying to explain "Financial Management Concepts in Layman's Terms".

Related Posts


Leave a Comment