**Tangible Net Worth Formula (Table of Contents)**

## What is Tangible Net worth Formula?

The term “Tangible Net worth” refers to the Net worth of an entity without taking into account the values or amount of any intangible assets such as goodwill, etc and the formula for the calculation of tangible net worth is expressed as total assets minus the sum of total liabilities and intangible assets. It is mostly used by entities or companies to study the position of an entity’s tangible assets and can accordingly help in planning the best policies for the entity’s.

Mathematically, it is represented as:

**Tangible Net Worth Formula = Total Assets – (Total Liabilities + Intangible Assets)**

**Or**

**Tangible NW = Tangible Assets – Total Liabilities**

Here, tangible assets are the difference between total assets and intangible assets. Mathematically, it is represented as:

**Tangible Assets = Total Assets – Intangible Assets**

The Tangible NW can be calculated using two methods –

- By taking the difference between Total assets and Total liabilities plus Intangible assets.
- By taking the difference of Tangible Assets and Total Liabilities

### Explanation

The formula for tangible net worth can be derived by using the following steps:

**Step 1:** Firstly, determine the value of Total Assets which is the sum of assets side of an account for the selected period.

**Total Assets = Fixed Assets + Non-Current Assets (including intangible assets) + Current Assets**

**Step 2:** Then, determine the value of Total Liabilities except for Share Capital (i.e. Equity Share Capital and Irredeemable Preference Shares Capital and Retained Earnings) which is the sum of the liability side of an account for the selected period.

**Total Liabilities = Long term borrowings + Short term Borrowings + Trade payables + other payables**

**Step 3:** Finally, the formula for Tangible Net worth is expressed as Total assets minus sum of Total liabilities and Intangible Assets.

**Tangible Net Worth = Total Assets – (Total Liabilities + Intangible Assets)**

### Examples of Tangible Net worth Formula

Given below are the examples for the calculation of the tangible net worth formula.

#### Example #1

**Let us take the example of a company whose balance sheet for a period is as follows:**

**Then for calculation of the tangible net worth, the following steps are to be taken:**

**Given, **

Total Assets = 1400000

Intangible Assets (Trademarks) = 75000

Total Liabilities (except Share Capital and retained earnings) = 1050000

First, we will calculate the tangible assets,

- Tangible Assets = Total Assets – Intangible Assets
- = 1400000 – 75000
- = 1325000

Now, Tangible Net Worth can be calculated by using the above formula as,

- = Total Assets – (Total Liabilities + Intangible Assets)
- = 1400000 – (1050000 + 75000)
**= 275000**

**Or**

- = Tangible Assets – Total Liabilities
- = 1325000 – 1050000
**= 275000**

#### Example #2

**Let us take the example of a company whose balance sheet for a period is as follows:**

**Then for calculation of Tangible Net worth, the following steps are to be taken:**

**Given,**

- Total Assets = 3050000
- Intangible Assets (Goodwill, Patent and Other Intangible assets) = 500000
- Total Liabilities (except Share Capital and retained earnings) = 1700000

First, we will calculate the tangible assets

- Tangible Assets = Total Assets – Intangible Assets
- = 3050000 – 500000
- = 2550000

Now, Tangible NW can be calculated by using the above formula as,

- = Total Assets – (Total Liabilities + Intangible Assets)
- = 3050000 – (1700000 + 500000)
**= 850000**

**Or**

- = Tangible Assets – Total Liabilities
- = 2550000 – 1700000
**= 850000**

#### Example #3

**Let us take the example of a company whose balance sheet for a period is as follows:**

**Then for calculation of the tangible net worth, the following steps are to be taken:**

**Given, **

- Total Assets = 2600000
- Intangible Assets (Goodwill and Patents) = 440000
- Total Liabilities (except Share Capital and retained earnings) = 1650000

First, we will calculate the tangible assets

- Tangible Assets = Total Assets – Intangible Assets
- = 2600000 – 440000
- = 2160000

Now, Tangible NW can be calculated by using the above formula as,

- = Total Assets – (Total Liabilities + Intangible Assets)
- = 2600000 – (1650000 + 440000)
**= 510000**

**Or**

- = Tangible Assets – Total Liabilities
- = 2160000 – 1650000
**= 510000**

### Relevance and Use

It plays a vital role in assessing the value of an entity wherein there is no subsidiary or group company. It is a very easy method to find the reliability of the entity’s business. It sometimes acts as the basic step in the valuation of the business as it is quite simple to calculate.

### Recommended Articles

This has been a guide to tangible net worth formula. Here we discuss the formula for the calculation of net worth of an entity without taking into account the amount of any intangible assets along with the examples. You can learn more from the following articles –