This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Any term which uses the phrase ‘net asset’ or ‘net assets’ must be examined closely. This term can describe wildly different situations - here are some possibilities:
Calculation: Total Assets less (Payables plus Other Current Liabilities)
Example: The Round Number CompanyTotal Assets = 300; Payables = 20, Other Current Liabilities = 8 Net Assets = 300 - 20 - 8 = 172 |
This definition is sometimes used to generate an alternative to the Net Asset Balance Sheet described below.
2. A different definition is used in the Net Asset Balance Sheet.
Calculation: Total Assets less Total Liabilities
Example: The Round Number CompanyTotal Assets = 300; Total Liabilities = 160 Net Assets = 300 - 160 = 140 |
3. A third definition is Net Asset Value (NAV) which is also called Book Value.
Calculation: Total Assets less Intangible Assets less Total Liabilities
Example: The Round Number CompanyTotal Assets = 300; Intangibles = 8; Goodwill = 20; Liabilities = 160 Net Assets = 300 - 8 - 20 - 160 = 112 |
Make sure you agree on the meaning!
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"