Intrinsic value of shares means the real worth of Company shares & not merely its face value.
To determine intrinsic value, we take net assets method because the value of shares is reflected in the form of Assets/ Outside liabilities.
In other words, the effect of transactions from investment of equity shares in company gets its real time value from various Assets acquired/ disposed & liabilities paid / taken over.
The value that appear in balance sheet is the face value of shares. So to know correct value as on date we take real time figures of Assets & Outsiders Liabilities.
Intrinsic value is the total assets of the company reduced by third party liabilities incl of preference share capital..
CAclubindia
