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How to calculate net worth of company

deepak kumar (sr accountant) (114 Points)

22 August 2011

hi,

how to calculate net worth of the company , How many method is exist to calculate net worth. what kind of reserve can include in net worth. Can i Add PL REserve, Revaluation Reserve (arise from Fixed Assest Revaluation) ?

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17 Replies

valji (Accounts manager-MBA) (2150 Points)
Replied 22 August 2011

there are two method for calculating net worth

1)share capital+reserve & surplus

2) Asset - Liability

2 Like

sri rama krishna mallela (Junior Manager F&A) (204 Points)
Replied 22 August 2011

Revaluation reserve should not be taken into account in calculation of networth

i dont gat what is pl reserve.

reshmi (CS- Final Student) (33 Points)
Replied 14 September 2011

hi Valji,

Could you please enlist the type of assets & liabilities that are considered while calculating the net worth of a Company?

Further, is it only free reserves that would be included in the 1st method or all types of reserves and surplus would be included?

Thanks

Reshmi

CA Sachin Rastogi (Audit/IFRS Manager) (338 Points)
Replied 14 September 2011

Well the net worth of the company is nothing but the amounts belonging to the shareholders. It should include share capital (equity and preference) and free reserves (reserves which can be distributed by way of dividend).

Or you can take the assets net of specific reserves created against them (like fixed assets need to be netted off against the revaluation reserve) less liabilities due to outsiders for the calculation of net worth.

1 Like

valji (Accounts manager-MBA) (2150 Points)
Replied 14 September 2011

check this link for your answer

/experts/net-worth-calculation-13251.asp

selim (Manager (Finance) ) (62 Points)
Replied 15 September 2011

Net Asset Value is considered as NET WORTH of a COMPANY .

Share Capital(Oridinary+Prefrence)+Reserves+ Retained Earnings

csmedha (Company Secretary) (91 Points)
Replied 29 August 2017

RESERVES AND SURPLUS + SHARE CAPITAL - PRELIMINARY EXPENSES (WRITTEN OFF DURING THE YEAR)

1 Like

Aragala aasadeep (Jr engineer) (34 Points)
Replied 15 June 2019

Sir, Can any please tell me. How to calculate net worth of a new enterprise which was in planning stage.

Puneet Taneja (Finance Professional) (1149 Points)
Replied 03 September 2020

Net worth of a company is calculated by subtracting Net liabilities from Net Assets. Net Worth is the amount belonging to the shareholders. Net Worth can be Calculated by two methods :

1. Assets - Liabilities

2. Share Capital + Reserves and Surplus

Free reserves are added while calculating net worth. Yes, you can Add Profit and Loss reserve as it is a free reserve. Revaluation reserve will be net off while valuing assets.

prasad Nilugal ( GST Practitioner & Accounts ) (14167 Points)
Replied 03 September 2020

As per companies act 2013 section 2 sub clause (57)

Net worth = Aggregate value of paid up share capital + Reserve created out of profit + securities premium + Debit or Credit balance of profit & Loss account - accumulated losses - deferred expenditure - Mics expenditure not written off as per the audited balance sheet .

Does not include reserve created out of revaluation of asset , write back of depreciation and amalgamation

shahyar husain (1235 Points)
Replied 05 December 2020

Net worth is the value of a person or company and can be computed by deducting the total liabilities from the total assets that are owned by the individual/company. If an individual or company owns assets that are greater than liabilities, it is said to show a positive net worth.

shahyar husain (1235 Points)
Replied 05 December 2020

It's actually pretty straightforward how to calculate a company's net worth: Total assets minus total liabilities = net worth. This is also known as "shareholders' equity" and is the same formula one would use to calculate one's own net worth.

Neethi V. Kannanth (.) (19015 Points)
Replied 13 January 2021

Net worth can be calculated by reducing the total liabilities from the total assets. Or it can also be calculated by adding paid up share capital and reserves

Ritik Chopra (student) (8123 Points)
Replied 13 February 2021

Net worth can be calculated from balance sheet from the following equation. Net Worth= Equity + Reserves & surplus - Fictitious assets/Misc Exp.. Net worth includes equity share capital and all reserves (including revaluation reserve) less expenses not written off.