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Under this method, the net value of assets of the company are divided by the number of shares to arrive at the value of each share. For the determination of net value of assets, it is necessary to estimate the worth of the assets and liabilities. The goodwill as well as non-trading assets should also be included in total assets.
The following points should be considered while valuing of shares according to this method:
* Goodwill must be properly valued
* The fictitious assets such as preliminary expenses, discount on issue of shares and debentures, accumulated losses etc. should be eliminated.
* The fixed assets should be taken at their realizable value.
* Provision for bad debts, depreciation etc. must be considered.
* All unrecorded assets and liabilities ( if any) should be considered.
* Floating assets should be taken at market value.
* The external liabilities such as sundry creditors, bills payable, loan, debentures etc. should be deducted from the value of assets for the determination of net value.The net value of assets, determined so has to be divided by number of equity shares for finding out the value of share.
Thus the value per share can be determined by using the following formula:
Value Per Share=(Net Assets-Preference Share Capital)/Number Of Equity Shares
Thank you Mr. George Asi, the question and answer.
Good answer mr venkitaraman/
All answers professors adequate and sufficient
dgree with both MR VENKITARAMAN & MR GEORGI
Mr. VENKITARAMAN has given breif answer.
It is necessary to estimate net tangible assets of the company (Net Tangible Assets = Assets - Liabilities) in order to value the shares, In valuing the figures by this method, care must be exercised to ensure that the figures representing the assets arc sound, i.e., intangible assets and preliminary expenses are eliminated and all liabilities (whether in books or not) are deducted from the value of the tangible assets. Non-trading assets are also included in the assets and the assets are taken at their market value, i.e., replacement value.
Given this method of assessment value of the company equal to the value of tangible assets and no credit is the value of intangible assets only if it has a value Soukah.otstkhaddm method of net asset value in measuring the rates of safety in the value of the stock as provide the investor the value of the assets that support the performance of the stock and can be compared to the results we get from the net asset method with other indicators, especially with the indicators that rely on the comparison of assets and profits when the value of the net assets, the largest Galbas what it expresses the company failed to meet expected profits and dividends.
