How is Net worth of company decided?



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Explain Briefly

2 Answer(s)


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The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities. In the business context, net worth is also known as book value or shareholders' equity.

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Well the net worth of the company is nothing but the amounts belonging to the shareholders. It should include share capital (equity and preference) and free reserves (reserves which can be distributed by way of dividend). Or you can take the assets net of specific reserves created against them (like fixed assets need to be netted off against the revaluation reserve) less liabilities due to outsiders for the calculation of net worth

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