Accounting Tutorials
- Assets
- Asset Accounts
- Assets in Accounting
- Total Assets
- Total Assets Formula
- Fixed Assets
- Fully Depreciated Assets
- List of Assets
- Types of Assets
- Examples of Assets
- Net Assets
- Book Value of Asset
- Fixed Assets Accounting
- Net Asset Formula
- Assets Formula
- Net Fixed Assets
- Property Plant and Equipment (PP&E)
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- Restricted Cash
- Inventories List
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- WIP Inventory (Work-in-Progress)
- Raw Material Inventory
- Lower of Cost or Market
- Inventory Write-Down
- Periodic Inventory System
- Ending Inventory Formula
- Average Inventory Formula
- Closing Stock
- Carrying Amount
- Carrying Value
- Inventory vs Stock
- Is Inventory a Current Asset?
- Current Assets
- Short Term Investments on Balance Sheet
- Current Assets vs Non-Current Assets
- Current Assets Examples
- Current Assets List
- Current Assets Formula
- Other Current Assets
- Short Term Assets
- Assets Revaluation
- FIFO vs LIFO
- First In First Out (FIFO)
- Last in First Out (LIFO)
- LIFO Reserve
- LIFO Liquidation
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Is Account Receivable - An Asset or Liability?
- Accounts Receivable Examples
- Accounts Receivable Process
- Is Accounts Receivable an Asset?
- Accounts Receivable - Debit or Credit?
- Accounts Receivables Factoring
- Recourse in Factoring
- Accounts Receivable Financing
- Accounts Receivable Journal Entry
- Net Realizable Value Formula
- Trade Receivables
- Net Realizable Value (NRV)
- Allowance for Doubtful Accounts
- Accrued Revenue
- Accrued Revenue Examples
- Deferred Revenue Expenditure
- Deferred Revenue Examples
- Liquid Assets
- Liquid Assets Examples
- Financial Assets
- Financial Assets Examples
- Financial Assets Types
- Quick Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Marketable Securities Examples
- Non-Marketable Securities
- Trading Securities in Balance Sheet
- Prepaid Expenses
- Prepaid Expense Examples
- Prepaid Insurance
- Intangible Assets List
- Tangible vs Intangible Assets
- Net Tangible Assets
- Tangible vs Intangible
- Contingent Asset
- Tangible Assets
- Deferred Tax
- Deferred Income Tax
- Deferred Tax Assets
- Capital Expenditure (Capex)
- Capex Calculation
- Capital Expenditure Examples
- Write-Off
- Capex vs Opex
- Salvage Value
- Residual Value
- Working Capital Management Importance
- Working Capital Examples
- Working Capital Loan
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Impariment of Assets
- Goodwill
- Goodwill Formula
- Goodwill Amortization
- Goodwill Impairment Test
- Intangible Assets
- Intangible Assets Examples
- Negative Goodwill
- Goodwill Valuation
- Capitalized Interest
- Accounting Basics (80+)
- Bookkeeping (52+)
- Balance Sheet (30+)
- Liabilities (68+)
- Shareholders Equity (91+)
- Income Statement (158+)
- Cash Flow Statement (17+)
- Accounting Careers (26+)
- Accounting Books (8+)
- Budgeting in Finance (31+)
Related Courses
What are Net Assets?
The net asset on the balance sheet is defined as the amount by which your total assets exceed your total liabilities. You simply need to add what you own (assets) and subtract it from whatever you owe (liabilities) to find out your company’s net assets. It is commonly known as net worth (NW).
Below is the Net asset Formula
Let us calculate the net assets of Colgate in 2014.
- Total Assets in 2014 (Colgate) = $13,459 million
- Total Liabilites in 2014 (Colgate) = $12,074 million
Net Assets Formula = Total Assets in 2014 – Total Liabilities in 2014
= $13,459 million – $12,074 million = $1,385 million
How to Calculate Net Assets?
Your Balance Sheet (the positional statement) is equally balanced between assets and liabilities.
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- From the above basic account format of the balance sheet, we can observe that the balance sheet is divided into Assets and Liabilities and Shareholders Equity
- Now if every item of the balance sheet is correctly listed, then the Total Assets must be equal to the Total of Liability and Share holder’s Equities.
- Remember our Net Worth is equal to the difference between Total Assets and Total Liabilities this leaves us with the Shareholders Equity.
- So we can say that It is actually similar to Shareholder’s Equity.
Increasing Net Assets Example
Amazon’s Assets has been increasing continuously over the past 5 year period. This is because they have been able to increase their Assets and earnings over a period of time.
Decreasing Net Assets Example
Sears Holding, however, is a classic example of the decrease in Assets over a period of time. Sears has been reporting continuous losses resulting in negative book value of the firm.
How to Calculate Net Assets for Individuals?
Recently, Chris Larsen (co-founder) of cryptocurrency company Ripple has become a fifth wealthiest person in terms of net worth. Now that we understand what is net worth to the company, let us look at how it can be calculated in case of an individual.
source: fortune.com
From an individual’s perspective, net assets mean the difference between how much a person owns and how much she owes. That means to improve your financial health your assets must be positively high.
Remember your earnings do not reflect your true financial health. Let’s take an example of two different people to make it clears.
- Ram earns Rs 45000/- per month while its expenses and liabilities (like monthly bills, installment of home loan/car loan, credit card liabilities, etc total a sum of Rs 47000/-). The financial health of Ram is said to be poor, as his Net worth is negative and nothing is left to invest.
- On the other hand, Shyam earns Rs 18000/- per month only He acquires zero liability and invests most of its income in assets like mutual funds Financial situation of Shyam, with no doubt is healthier than that of Ram’s
So from the above example, it becomes clear that:
- Your financial health is mainly decided by what net worth you own
- Earnings are important just to use your earned money to make more money
- Investment in assets helps secure your net worths
Conclusion
Net assets is a simple way to identify the health of the company as well as an individual. If your company earnings are increasing but your assets are also decreasing, your company’s health might not be improving.
Recommended Articles
This has been a guide Net Assets. Here we discuss how to calculate Net Assets of a company and an individual along with its formula and practical examples. You can learn more about accounting from the following articles –
