help needed in valuation of shares and intangible assets.

Hi i dont know what NET ASSETS BACK UP means... I mean, never heard of such term....

While normal rate of return is the RETURN expected on capital invested in the business... In simplest language, we can say when u spent Rs. 10 then u expect some benefit for the same. Similarily, when capital is invested in business, then some return is expected, that is termed as NORMAL RATE OF RETURN...

Generally, such return is calculated considering the net assets, as that is the amount (we believe) generates income.

Moreover, the third party liabilities (outsiders') are alwz deducted from the total assets...

Here the total assets should not include any fictitious assets like preliminary exps.... But an intangible asset like goodwill can be included in total assets (if its taken over too)....

i think by net asset backup you seem to be referring to the asset backing ratio well when we are valuing shares and need to calculate NRR the asset backing ratio is one of the risk factors which helps us in calculating the normal rate of return of the organization by taking the  industry   NRR as the base .

Asset backing ratios show the relationship between the intrinsic value of shares and the paid up share capital higher the ratio lower the risk this  ratio shows that in case of liquidation are the assets of the organizations less payments to all those before equity share holders is enough to  repay theequity investment  in the concern        

while calculating the NRR if the risk factor is favorable then you ignore it and if it is adverse you take an assumption as regard to the % with which NRR has to be increased and take .5%

goodwill shall always be included while calculating the intrinsic value and you shall leave all fictitious assets

Thanks Dhiraj and Rohit for ur helpful replies.

Hii Dhiraj in liabilities to outsiders u said it will be deducted from total assets. but in one of reference books its treatment is given like first it is included in total assets and then the same amount is deducted from total liabilities which ultimately means no effect. so which one to follow??? are u talking about total assets or net assets???

Net assets backing is important from the point of view of safety. the poor net asset backing will increase the normal rate since the investors consider themselves unsafe. how is it so???