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How to calculate net worth of company

Saranya (Sr. Finance Executive) (228 Points)

25 April 2013

Please help in calculating Net Worth of the company.

Saranya

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13 Replies

(Guest)

Net Worth = Total Assets - fictitious assets - Dr. Balance of P & L (if any) - Outside Liabilities

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Prashanth S K (Practice) (148 Points)
Replied 25 April 2013

Its Equity share capital+Preference share capital+reserves & surplus - accumulated losses.

CA D R P (Chartered Accountant) (313 Points)
Replied 25 April 2013

Both the way are correct but, more logical is "Its Equity share capital+Preference share capital+reserves & surplus - accumulated losses. "

Praveen Kumar (Manager - Finance & Accounts) (189 Points)
Replied 26 April 2013

How to calculate Net Worth of Company if Share Application Money Pending Allotment also in Balance Sheet of company ?

(Guest)

Use my formula stated above

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IA & Risk expert (Freelancer) (198 Points)
Replied 26 April 2013

Share application money is outside liability till allotment is done!

VIKAS.A (SOMETHING IS BETTER THAN NOTHING) (1095 Points)
Replied 27 April 2013

Networth alters as per the Requirements,recently we have given networth certificates to a sharebroking company which is mandatory on their part to submit within one month after the halfyear ending,we have given to NSE and MCX for both the calculation is different and while providing for banks it will be in another format.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 27 April 2013

Net worth = Total Share Capital and Free Reserves.

Definitions of Net Worth:

Under section 2(29A) of the Companies Act, net worth means the sum total of the paid up capital and free reserves after deducting the provisions or expenses as may be prescribed.

Explanations:- for the purpose of this clause, free reserves means all reserves created out of the profits and share premium account but does not include reserves created out of revaluation of assets, write back of depreciation provisions and amalgamation.

2*[(ga) of the Sick Industrial Companies (Special Provisions) Act, 1985 "net worth" means the sum total of the paid-up capital and free reserves.

Explanation.-- For the purposes of this clause, "free reserves" means all reserves credited out of the profits and share premium account but does not include reserves credited out of re-evaluation of assets, write back of depreciation provisions and amalgamation.

Under Rule 2(d) of Acceptance of Deposit Rule, 1975 “free reserve” includes the balance in the share premium account, capital and debenture redemption reserve and any other reserves shown or published in the balance sheet of the company and created by appropriation out of the profits of the company, but does not include the balance in any reserve created:

For repayment of any future liability or for depreciation in assets or for bad debts:
by the revaluation of any assets of the company.

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CA.SKR (CA; CS-Final (One Group); DISA (ICAI); Insolvency Professional) (442 Points)
Replied 28 April 2013

Well explained by CS. Ankur Srivastava.

Mrinal Singh (student) (60 Points)
Replied 20 November 2015

“net worth” means the aggregate value of
the paid- share capital and all reserves
created out of the profits and securities
premium account, after deducting the
aggregate value of the accumulated losses,
deferred expenditure and miscellaneous
expenditure not written off, as per the
audited balance sheet, but does not include
reserved created out of revaluation of
assets, write-back of depreciation and
amalgamation.

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(Guest)

Are there also different ways or formulas to calculate the Net Worth of a company? If yes, please let me know.

shahyar husain (1240 Points)
Replied 25 December 2020

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.

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Ritik Chopra (student) (8128 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.