WallStreetMojo

WallStreetMojo

WallStreetMojo

MENUMENU
  • Blog
  • Free Video Tutorials
  • Courses
  • All In One Bundle
  • Login
Home » Accounting Tutorials » Assets Tutorials » Net Asset Formula

Net Asset Formula

By Harsh KataraHarsh Katara | Reviewed By Dheeraj VaidyaDheeraj Vaidya, CFA, FRM

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

Net Asset Formula

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 have 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

You can download this Net Asset Formula Excel Template here – Net Asset Formula Excel Template

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.

Net Asset Formula Example 1

Solution:

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

Example 1.1

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

Net Assets = $10,500,000 – $5,500,000

Net Asset will be –

Net Asset Formula Example 1.2

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.

Popular Course in this category
Sale
All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)
4.9 (1,067 ratings)
250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion
View Course

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

Net Asset Formula Example 2

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

Example 2.1

Step 2: Calculation of Total assets

Net Asset Formula Example 2.2

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

Example 2.3

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

Net Assets will be –

Net Asset Formula Example 2.4

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.

Net Asset Formula Example 3

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

Net Asset Formula Example 3.1

Step 2: Calculation of Total assets

Example 3.2

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

Net Asset Formula Example 3.3

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

Net Assets will be –

Example 3.4

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 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.

Recommended Articles

This has been a guide to Net Asset Formula. Here we discuss how to calculate net assets using its formula along with practical examples and downloadable excel template. You can learn more about excel modeling from the following articles –

  • Return on Net Assets
  • Return on Operating Assets
  • Types of Financial Assets
  • Net Cash Flow
0 Shares
Share
Tweet
Share
Primary Sidebar
Footer
COMPANY
About
Reviews
Contact
Privacy
Terms of Service
RESOURCES
Blog
Free Courses
Free Tutorials
Investment Banking Tutorials
Financial Modeling Tutorials
Excel Tutorials
Accounting Tutorials
Financial Statement Analysis
COURSES
All Courses
Financial Analyst All in One Course
Investment Banking Course
Financial Modeling Course
Private Equity Course
Venture Capital Course
Excel All in One Course

Copyright © 2021. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.
Return to top

WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Book Your One Instructor : One Learner Free Class
Let’s Get Started
Please select the batch
Saturday - Sunday 9 am IST to 5 pm IST
Saturday - Sunday 9 am IST to 5 pm IST

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

Login

Forgot Password?

WallStreetMojo

Free Accounting Course

You will Learn Basics of Accounting in Just 1 Hour, Guaranteed!

* Please provide your correct email id. Login details for this Free course will be emailed to you

WallStreetMojo

Download Net Asset Formula Excel Template

Special Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More