How to calculate asset size of a nbfc (asset finance company

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haridas kattoor

haridas kattoor (Querist)
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28 October 2016 Dear Sir,

How I can calculate asset size of a Asset Finance Company?

Thank You

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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28 July 2024 Calculating the asset size of a Non-Banking Financial Company (NBFC), specifically an Asset Finance Company (AFC), involves determining the total value of the assets it holds. The asset size is a crucial metric for assessing the scale and financial health of an NBFC. Here’s a step-by-step guide on how to calculate it:

### **1. Identify the Components of Asset Size**

Asset size for an Asset Finance Company typically includes:

- **Loan Assets:** The value of loans provided by the NBFC, including loans against assets such as vehicles, machinery, etc.
- **Investment Assets:** Investments made by the NBFC in securities, bonds, or other financial instruments.
- **Fixed Assets:** Physical assets owned by the NBFC, such as office buildings, equipment, and vehicles.
- **Cash and Cash Equivalents:** Liquid assets including cash in hand, cash at bank, and short-term investments.
- **Receivables:** Any amounts due from borrowers or clients.
- **Other Assets:** Any other assets not categorized above, such as prepaid expenses and advances.

### **2. Collect Financial Statements**

To accurately calculate the asset size, you need the following financial statements of the NBFC:

- **Balance Sheet:** Provides detailed information on assets, liabilities, and equity.
- **Schedule of Investments:** Details of the investments made by the NBFC.
- **Loan Portfolio Summary:** Breakdown of the loan assets.

### **3. Calculate Asset Size**

**3.1. ** Summarize Asset Categories:**

1. **Loan Assets:** Add up the value of all loans provided by the NBFC.
2. **Investment Assets:** Add up the value of all investments in securities, bonds, etc.
3. **Fixed Assets:** Calculate the total value of physical assets.
4. **Cash and Cash Equivalents:** Sum up all cash and liquid assets.
5. **Receivables:** Total the amounts receivable from clients or borrowers.
6. **Other Assets:** Include any other relevant assets.

**3.2. ** Aggregate Total Assets:**

Add the values from all the asset categories:

\[ \text{Total Asset Size} = \text{Loan Assets} + \text{Investment Assets} + \text{Fixed Assets} + \text{Cash and Cash Equivalents} + \text{Receivables} + \text{Other Assets} \]

### **4. Example Calculation**

Let’s assume the following values for an Asset Finance Company:

- **Loan Assets:** ₹100 crore
- **Investment Assets:** ₹20 crore
- **Fixed Assets:** ₹10 crore
- **Cash and Cash Equivalents:** ₹5 crore
- **Receivables:** ₹15 crore
- **Other Assets:** ₹2 crore

**Total Asset Size Calculation:**

\[
\text{Total Asset Size} = ₹152 \text{ crore}
\]

### **5. Review and Compliance**

Ensure that the calculations are aligned with regulatory requirements and accounting standards. For NBFCs in India, compliance with the Reserve Bank of India (RBI) regulations and the Indian Accounting Standards (Ind AS) is essential.

### **6. Regular Monitoring**

Regularly monitor and update the asset size to reflect any changes in the asset portfolio and financial condition of the NBFC.

### **Summary**

To calculate the asset size of an Asset Finance Company:

1. **Identify all asset components** (loans, investments, fixed assets, cash, receivables, and other assets).
2. **Collect financial statements** to get accurate figures.
3. **Sum up all asset categories** to get the total asset size.
4. **Ensure compliance** with regulatory standards.

By following these steps, you can determine the asset size of an Asset Finance Company accurately.

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