## Formula to Calculate Net Assets

Net Assets can be defined as the total assets of an organization or the firm, minus its total liabilities. The number of net assets can be tallied out with the shareholder’s equity of a business. One of the easiest ways to calculate net assets is by using the below formula.

**Net Assets = Assets – Liabilities**

### Step by Step Calculation of Net Assets

The calculation of Net Assets is quite simple and is easy to understand. We need to cover below three steps and then we will be having Net Asset value.

**Step 1:**First, we need to calculate the total of assets which is the right side of the balance sheet. One can also take a total of assets or if only trial balance is available then we need to add assets one by one and then have a grand total of assets.**Step 2:**After step 1, we can in a similar fashion calculate the total of liabilities that the firm is required to pay or is obliged somewhere in the future. Like step 1, one can add line by line liabilities and get a total of liabilities. Total liabilities can include total borrowings, provisions, current, and other non-current liabilities.**Step 3:**In the last step, we need to just deduct the total calculated in step 1 which is total assets from total liabilities which was calculated in step2.

### Examples

#### Example #1

**PQR Ltd is in a stage of finalizing its books of accounts and the MD of the company wants to know what their net asset is. Below is the information extracted from their trial balance, you are required to calculate Net Asset.**

**Solution:**

So, the calculation of net asset can be done as follows

Well, this is a straight forward example of calculating net assets.

Net Assets = $10,500,000 – $5,500,000

Net Asset will be –

**Net Assets = $5,000,000**

Hence, the Net assets of PQR ltd are $5,000,000.

#### Example #2

**HDFC bank one of the leading banks in the industry and one of the best banks operating in India. Sam who is a lead analyst at CRISIL is looking for a new opportunity and one of the criteria for stock screeners is that the company’s net asset should not be negative nor zero.**

**Below extract from BS (reported in cr.) for the period ended 2018.**

**You are required to assess whether an above stock will make up in Sam’s screener list?**

**Solution:**

Here we are given a few variables from the liabilities side and few variables from the asset side. First, we need to calculate total assets and then total liabilities.

**Step 1:** Calculation of Total liabilities

**Step 2:** Calculation of Total assets

**Step 3:** We can use the above equation to calculate net assets:

Net Assets = 11,03,232.77 – 9,93,633.64

Net Assets will be –

**Net Assets = 1,09,599.13**

Therefore, the net assets of the HDFC bank for March 2018 were 1,09,599.13 which would compromise equity and reserves.

#### Example #3

**Kedia broker and the company are following TATA motors one of the listed companies of NSE. TATA motors have been recently suffering from decline sales of its most sold product Jaguar Land Rover and hence its shares have been declining since then. Aman who is working at Kedia ltd. wants to know the net assets of the company first.**

**You are required to calculate the net assets of the company.**

**Solution:**

Here we are given a few variables from the liabilities side and few variables from the asset side. First, we need to calculate total assets and then total liabilities.

**Step 1:** Calculation of Total liabilities

**Step 2:** Calculation of Total assets

**Step 3:** We can use the above equation to calculate net assets:

Net Assets = 3,52,882.09 – 2,57,454.18

Net Assets will be –

**Net Assets = 95427.91**

Therefore, the net assets of the TATA motors for March 2018 were 95,427.91 which would compromise equity and reserves.

### Net Asset Calculator

You can use the following Net Asset Calculator

Assets | |

Liabilities | |

Net Asset Formula | |

Net Asset Formula = | Assets – Liabilities |

0 – 0 = | 0 |

### Relevance and Uses

Assets net of the total liabilities will net to the owner’s equity. Essentially, the shareholders or the stockholders of the firm or the company or the business owns the assets which shall not have outstanding loans. This would be the same as home with a mortgage loan upon it. The equity or the net assets in the home is the value of the home and subtracting the outstanding mortgage loan. Net assets are a similar concept.

If desired, owners can increase their net assets in a few several ways. They can make new investments in the firm or in the company or the management or the owners can simply leave excess profits in the bank account of the company rather than calling for distribution or dividend. If owners or shareholders or stockholders withdraw money out of the business say in the form of a distribution or dividend, their nets assets shall decrease. The ratio of liabilities to total assets shall go up as the owners took out the cash which is part of an asset, from the firm or the business.

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