Wednesday, September 28, 2011

How To Understand Net Tangible Assets Calculation Procedure

Net Tangible Assets (NTA) Calculation Procedure

Net Tangible Assets (NTA) are the total number of a company's touchable or real property with a monetary value. The formula to find a company's NTA is NTA equals Total assets minus Liabilities minus Intangible assets (NTA = Total assets - Liabilities - Intangible assets). The total assets of a company are all of the tangible and intangible assets and liabilities that belongs to the company. Liabilities are any debts the company may have. Intangible assets are just the opposite of tangible assets, such as goodwill or patents. Things that aren't real or touchable but have a monetary value.

To be able to find a company's NTA you must first find their financial statements. A company's financial statements can be obtained three different ways. The first way and maybe the quickest, is to download it straight from that company's website. The second way and almost as quick, is to download it from the security and exchange commission's website. The last and possibly the slowest, is to contact the company directly by phone for their financial statements. Once you have gotten the company's financial statements, find the balance sheet in the annual or quarterly report. There you will find the total assets, liabilities, and intangible assets values. If the intangible assets aren't already separated, you can easily separate them from the tangible assets. After you do that total the value of the intangible assets. Then plug in all your values into the appropriate place in the formula above.

Now let me give you an example of how to plug in the numbers. The balance sheet most likely, won't be like this. Let's say Total assets are two million six hundred forty-five thousand (2,645,000), that Liabilities are five hundred forty-five thousand (545,000), and that Intangible assets are six hundred thousand (600,000). Since these are the numbers you would take the formula above (NTA = Total assets - Liabilities - Intangible assets) and replace the words with their respective numbers. You would replace Total assets with 2,645,000, Liabilities with 545,000, and Intangible assets with 600,000. So the equation would now look like this: NTA = 2,545,000 - 545,000 - 600,000. First subtract the Liabilities from the Total assets. That means your equation should now look like this: NTA = 2,100,000 - 600,000. Next subtract the Intangible assets from the Total assets, which would leave you with NTA = 1,500,000. So the NTA is one million five hundred thousand (1,500,000).

The net tangible assets calculation procedure can be useful. Whether you're a consumer (a customer or person who purchases a companies merchandise or products) or a company. The reasons it can be useful to a consumer is so they know if they're buying from a good company or if they wanted to invest or buy stock in the company, if the company would be good or bad to do so. The reasons it can be useful to a company is to check on any competitors they may have and see how well or awful they are doing. It can also be useful for a company to see how them theirself are doing. A company could also compare their own NTA with a competitor's NTA to see which company is doing better. A company can also use it to see if it would be wise to invest in another company or not.

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