What is net assets?

Net assets is one of the economic terms that any company needs to take into account, since net assets are used to determine the value of a company. This is because the net asset consists of the capital available in a company when the total assets are subtracted by the debts that cause said assets. The difference obtained as a result is what is known as net assets.

Items of net assets

In order to obtain the net assets there are 2 fundamental data that you have to know about the company, since it is the difference between the two that results in the data of the net assets:

  • Assets: groups together the resources acquired by the company in order to obtain a series of benefits. These can range from the social capital, reserves and own funds to the goods or services necessary to carry out economic activity, such as materials, machinery, electronic devices ...
  • Debts: in order to pay the asset and finance the economic activity, companies must assume a series of debts and obligations called liabilities in accounting. Any natural or legal person must pay the debts generated by their assets, whether they are from suppliers, banks or the Public administration.

But the net assets obtained as a result of subtracting the two previous elements (Assets - Liabilities) not only reflects the value of a company, but is also the source of the dividends distributed among the shareholders.

How to calculate net assets

The calculation of net assets is easy if we have all the necessary data to carry it out. Therefore, before calculating the net assets of a company, we must make sure that we have the data of all the assets and liabilities involved in economic activity.

  • Step 1: Add up all assets, which can include cash, real estate, the value of stocks, insurance policies, personal property ...
  • Step 2: add all the debts, which can include loans, mortgages, credit cards, accounts pending payment to suppliers, taxes or fees pending payment to the public administration ...
  • Step 3: subtract the sum of debts or liabilities from the sum of assets.
  • Results: if the result is positive, it means that we have more and better assets than liabilities. On the other hand, if the result is negative, it will mean that we have a problem of debts and liabilities, as they are greater than assets.

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