11 February 2010
WHAT IS THE TRUE MEANING OF NET WORTH? IF A COMPANIES INVESTMENT'S MARKET VALUE IS HIGHER THAN ITS BOOK VALUE THEN DO WE HAVE TO CONSIDER IT IN CALCULATING NET WORTH? AND IF A COMPANIES DEPRECIATED VALUE OF FIXED ASSETS IS LOWER THAN THE BOOK VALUE OF FIXED ASSET THEN DO WE HAVE TO CONSIDER IT IN CALCULATING NET WORTH? PLZ HELP........
Net worth = Total asset - total liabilities except share capital and debenture.
Hence relating to your question if company invest in shares you have to see AS 13 accounting for investment and value investment accordingly and it definately included in net worth.
Relating to your fixed assets it also includes in net worth and also you have to see AS 10 for valuation of fixed assets
Sum of share capital and reserves less miscellaneous expenditure.
Only the figures considered in the Financial Statements are taken to decide NET WORTH.
How these figures have been decided; is a matter of finalisation of books by the Management and according reported by the Auditors in their Audit Report.
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