What does net assets mean?

DescriptionNet asset value is the value of an entity's assets minus the value of its liabilities, often in relation to open-end or mutual funds, since shares of such funds registered with the U. S. Securities and Exchange Commission are redeemed at their net asset value.

Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities. In finance, net assets refers to the value of a company's assets minus its liabilities. For individuals, the concept is the same as net worth. The formula for net assets is:

Net assets = Total assets - Total liabilities

Let's assume that Company XYZ's balance sheet reported $10,500,000 in assets and $5,000,000 in total liabilities. The company's net assets would be:

Net Assets = $10,500,000 - $5,000,000 = $5,500,000

It is important to note that most assets and liabilities on the balance sheet are listed at their book value rather than at their fair market value, and thus net assets doesn't necessarily represent the cash a company would have leftover if it sold all of its assets and paid all of its liabilities.