What is a net asset?

(With Importance and Examples) The net assets of a company represent its total value, which individuals determine by subtracting liabilities from total assets. Different net asset calculations provide specific information regarding a company's financial health.

What is the difference between net assets and equity?

Net assets means the same thing as equity with a slight twist. Net assets refers to equity as the amount of the business the owners actually own. It’s the owners’ claim to the assets of the company. The term net assets comes from the accounting equation. As you can see, the assets of a company are equal to the liabilities and owners’ equity.

What does a high net asset value mean?

A higher net asset value indicates that a business is doing well financially. Net assets are important because they express the difference between what an entity owns and what it owes. Companies with positive net assets may be financially healthy. Conversely, if a company's net assets are negative, it may be experiencing financial problems.

How do you calculate net assets?

The term net assets comes from the accounting equation. As you can see, the assets of a company are equal to the liabilities and owners’ equity. If you move the liabilities over to the assets side of the accounting equation, you will get the net assets equation. Now you can see that the assets net of the liabilities equal the owner’s equity.