Net worth Clarification

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Goodwill is not included when calculating a company's tangible net worth, which is simply assets minus liabilities. Banks consider factors beyond net worth when approving loans, such as growth opportunities, brand value, and the future prospects of the company. Assets may also be pledged as security for the loan.

thiyaga rajan

thiyaga rajan (Querist)
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06 July 2021 Is Good will of a company is considered in calculating the net worth of a company?

How a Good will is calculated?

If a company's net worth is 1 crore, how banks give loan worth of 10 crore?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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06 July 2021 Goodwill of a company is not considered in calculating the tangible net worth of a company.

Net Worth = Assets-Liabilities.

Besides networth the bank will consider growth opportunities of the company.
If the loan is for a new factory it will be pledged against the loan.

thiyaga rajan

thiyaga rajan (Querist)
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06 July 2021 Thanks a lot sir

So, does the bank consider the brand value and the future of company growth etc, as per current market scenario ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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07 July 2021 Yes, it will consider.

thiyaga rajan

thiyaga rajan (Querist)
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07 July 2021 Thanks for your reply sir

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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07 July 2021 Yes, it will consider.