Net Worth

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2010 In a Limited company the Net Worth of a company is Share capital+reserve & surplus(excluding Revaluation reserve) - Misc expenditure & losses.My question is whether preference share capital includes in share capital or its only equity share capital.Also in reserve & surplus if there is revaluation reserve then its excluded and if consists capital reserve then should it be excluded because only free reserves are taken to calculate net worth

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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06 August 2010 Preference share capital should be included in share capital to arrive the net worth of the company.

Querist : Anonymous

Querist : Anonymous (Querist)

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CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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06 August 2010 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 (excluding revaluation reserve) less expenses not written off. It is that part of the company which belongs to the shareholders.

Networth calculated as follows:
Paid up Capital/Partner's Capital
Add: Reserve & Surplus
(excluding revaluation reserves)
Less: Accumulated losses if any -
Less: Miscellaneous Expenditure -
Total Networth**

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vrnanda

vrnanda (Expert)
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06 August 2010 dear friend,

though there were instances to include preference share capital in the networh,

preference share capital should not be included in the computation of the networth as the same is payable to the outsiders. net worth shall mean the amount after all obligations.

in general, preference capital is payable to outsiders(other than equity holders).

and when it comes to Capital Reserve, please be specific what reserve is exactly you are referring to. preference redemption reserve, capital redemption reserve, debenture redemption reserve are all capital in nature.

however capital reserves is not availble for paying dividends, but the same are available for distribution of the bonus shares, which shall be constitued as available for shareholers and should therefore be included.

hope this clarification will help you for your query, apply this in your specific case.

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