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Net Asset Value (NAV) helps in taking the investment decisions

Posted By On 5/28/2008 08:09:00 PM
1.  One of the most common term which is used to define the valuation is NAV or Book value and one can understand it as the net value of all the assets of the company.

2. One can get NAV of fund or a company is by dividing the the net worth of the company by the total number outstanding shares.

3. For example a company's has a share capital of Rs. 200 crores (20 crores shares of Rs. 10 each) and its reserves and surplus is another Rs. 200 crores. Net worth of the company would be Rs. 400 crores (equity and reserves) and NAV would be Rs. 20 per share (Rs. 400 crores divided by 20 crores outstanding shares).

4. ALternatively one can find the NAV by adding all assets and subtracting all outside liabilities from them. and thus one is able to get the net worth. One has the option to select either of the methods to find out NAV.

5. NAV is an important tool while taking investment decisions as one has the ability to compare the NAV with the going market price.

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