Net worth calculation

CS Himangshu Kedia (Senior Manager - Corporate Law Matters) (995 Points)

02 January 2012

Is preference share capital included in the calculation of Net Worth of a company?

Reply Follow

21 Replies

CA SANKET AGGARWAL (Professional Consultant) (139 Points)
Replied 02 January 2012

As the Preference share is also a liability for the Equity and we calculate net worth for the Equity only so that is shall be subtracted.

2 Like

Rajesh (student) (167 Points)
Replied 03 January 2012

yes shall be added to networth

Networth:
Equity Share Capital + Reserves + Preference Capital - Miscellaneous Expenditure

It is the total assets of the company less its current liabilities, long term debt, and miscellaneous expenses. Net worth is also known as shareholder's equity or shareholders funds. Net worth includes equity share capital and all reserves (including revaluation reserve) less expenses not written off. It is that part of the company which belongs to the shareholders.

1 Like

Sanket (!..Live to Give..!) (16304 Points)
Replied 03 January 2012

Definition 1

For a company, total assets minus total liabilities. Net worth is an important determinant of the value of a company, considering it is composed primarily of all the money that has been invested since its inception, as well as the retained earnings for the duration of its operation. Net worth can be used to determine creditworthiness because it gives a snapshot of the company's investment history. also called owner's equity, shareholders' equity, or net assets.

Definition 2

For an individual, the value of a person's assets, including cash, minus all liabilities. The amount by which the individual's assets exceed their liabilities is considered the net worth of that person.

Formula for calculating Networth

equity share capital+preference share capital + reserve and surplus + profits - fictitious assets like preliminary expense - losses

4 Like

Parashar (Company Secretary 2004) (1013 Points)
Replied 03 January 2012

Formula for calculating Networth equity share capital+preference share capital + reserve and surplus + profits - fictitious assets like preliminary expense - losses

SUBHASHIS DEY (ACCOUNTANT) (44 Points)
Replied 15 July 2013

net worth = share capital + reserve. Is it correct or not?

MAYANK_Karnawat (Senior Officer) (21 Points)
Replied 26 December 2015

When we apply formula Net worth= Equity + Reserves & surplus - Fictitious assets/Misc Exp.

Please tell should we include Long term debt or Long term liabilities also in Net worth?

Mayank Gupta (CHARTERED ACCOUNTANT) (21 Points)
Replied 11 January 2016

Deferred tax assets/liability be considerable while computing net worth ??

jaswanth (Student CA IPC / IPCC) (31 Points)
Replied 27 January 2016

SIR/MADAM

DOES IT INCLUDE SHARE APPLICATION MONEY PENDING ALLOTMENT

MOHD ANZAR ALI (EMPLOYEE) (78 Points)
Replied 01 March 2016

yes prefrence share capital would be included

Pawan (Service) (21 Points)
Replied 16 July 2016

Looses will deducted from Networth Calculation?

Kartikey Jain (Intern) (2377 Points)
Replied 21 June 2018

Hi Pawan,

Yes, Losses need to be deducted while computing Net Worth of a company.

Monu Prajapati (45 Points)
Replied 07 February 2020

yes while calculating net worth of a company Deferred Tax Assets and Deferred Tax Liability as it shall be required to pay tax so that should be considered, as it shall be paid to the govt. and shareholders have not right