net asset value

Examples of net asset value in the following topics:

• Total Assets Turnover Ratio

  • Total assets turnover = Net sales revenue / Average total assets
  • "Sales" is the value of "Net Sales" or "Sales" from the company's income statement".
  • In financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.
  • Anything tangible or intangible that is capable of being owned or controlled to produce value, and that is held to have positive economic value, is considered an asset.
  • The balance sheet of a firm records the monetary value of the assets owned by the firm.

• Assets

  • The intangible asset "goodwill" reflects the difference between the firm's net assets and its market value; the amount is first recorded at time of acquisition.
  • The additional value of the firm in excess of its net assets usually reflects the company's reputation, talent pool, and other attributes that separate it from the competition.
  • Goodwill must be tested for impairment on an annual basis and adjusted if the firm's market value has changed.
  • The investor's proportional share of the associate company's net income increases the investment (and a net loss decreases the investment), and proportional payment of dividends decreases it.
  • In the investor's income statement, the proportional share of the investee's net income or net loss is reported as a single-line item.

• Depreciation

  • Depreciation refers to two very different but related concepts: the decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle).
  • The allocation of the cost of an asset to periods in which it is used up affects net income.
  • the expected salvage value, also known as residual value of the asset
  • The cost of an asset so allocated is the difference between the amount paid for the asset and the salvage value.
  • Depreciation is any method of allocating net cost to those periods expected to benefit from use of the asset.

• Relationships between ROA, ROE, and Growth

  • A company has net income of 500,000.
  • It has total assets valued at 3,000,000.
  • Return on assets is equal to net income divided by total assets.
  • In terms of growth rates, we use the value known as return on assets to determine a company's internal growth rate.
  • Return on assets is equal to net income divided by total assets.

• Fixed Assets Turnover Ratio

  • Fixed-asset turnover is the ratio of sales to value of fixed assets, indicating how well the business uses fixed assets to generate sales.
  • It is, therefore, obligatory that in order to accurately determine the net income or profit for a period depreciation, it is charged on the total value of asset that contributed to the revenue for the period in consideration and charge against the same revenue of the same period.
  • This is essential in the prudent reporting of the net revenue for the entity in the period.
  • Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet).
  • Fixed asset turnover = Net sales / Average net fixed assets

• Noncash Items

  • Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is an accounting term for assets and property.
  • Broadly speaking, depreciation is a way of accounting for the decreasing value of long-term assets over time.
  • On a more detailed level, depreciation refers to two very different but related concepts: the decrease in the value of tangible assets (fair value depreciation) and the allocation of the cost of tangible assets to periods in which they are used (depreciation with the matching principle).
  • The former affects values of businesses and entities.
  • The latter affects net income.

• Depreciation

  • Depreciation refers to two very different but related concepts: the decrease in value of assets (fair value depreciation) and the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle).
  • The former affects values of businesses and entities.
  • The latter affects net income.
  • Generally this involves four criteria: cost of the asset, expected salvage value (residual value of the asset), estimated useful life of the asset, and a method of apportioning the cost over such life.
  • The salvage value (residual value or scrap value) is an estimate of the value of the asset at the time it will be sold or disposed of.

• Balance Sheets

  • The difference between the assets and the liabilities is known as "equity. " Equity is the net assets or net worth of the capital of the company.
  • According to the accounting equation, net worth must equal assets minus liabilities.
  • Securities and real estate values are listed at market value rather than at historical cost or cost basis.
  • Personal net worth is the difference between an individual's total assets and total liabilities.
  • If applicable to the business, summary values for the following items should be included in the balance sheet: Assets are all the things the business owns, including property, tools, cars, etc.

• Return on Total Assets

  • The return on assets ratio (ROA) is found by dividing net income by total assets.
  • When profit margin and asset turnover are multiplied together, the denominator of profit margin and the numerator of asset turnover cancel each other out, returning us to the original ratio of net income to total assets.
  • Second, the total assets are based on the carrying value of the assets, not the market value.
  • If there is a large discrepancy between the carrying and market value of the assets, the ratio could provide misleading numbers.
  • The return on assets ratio is net income divided by total assets.

• Preparation of the Balance Sheet

  • Balance sheets are prepared with either one or two columns, with assets first, followed by liabilities and net worth.
  • All balance sheets follow the same format: when two columns are used, assets are on the left, liabilities are on the right, and net worth is beneath liabilities.
  • When one column is used, assets are listed first, followed by liabilities and net worth.
  • On a balance sheet, the value of inventory is the cost required to replace it if the inventory were destroyed, lost, or damaged.
  • Like the other fixed assets on the balance sheet, machineryand equipment will be valued at the original cost minus depreciation.