Net Assets

The net assets in a company is equivalent to the total assets less total liabilities. This is normally the term used in a mutual fund, ETF or REITS.

The net asset value can be calculated as :

Total assets – Total liabilities

Growing net asset value and negative net asset value

A net asset value figure that is growing over time will mean that the company has created value for its shareholders. If a company is consistently profitable and earns a return in excess of its cost of capital, the company’s net asset value will grow. A company that consistently loses money will have a declining net asset value over time. In fact, net asset value can become a negative figure when the total liabilities exceed total assets. Negative net asset values mean that the company’s finances are not healthy.




Compare net asset values over a number of years

The net asset value of the company changes over time. Hence, it is important to compare the net asset value of the company over time, rather than as a stand alone figure.

Read : Current Assets