Is preference share capital included in the calculation of Net Worth of a company?
Net worth calculation
CS Himangshu Kedia (Senior Manager - Corporate Law Matters) (995 Points)
02 January 2012
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.
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.
Sanket
(!..Live to Give..!)
(16427 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
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
Kartikey Jain
(Intern)
(2382 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
prasad Nilugal
( GST Practitioner & Accounts )
(14805 Points)
Replied 31 October 2020
Net worth is define under section 2( 57) of the Companies act 2017 , so please refer .
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