An entrepreneur knows that paying attention to a company’s indicators is fundamental to making strategic decisions. However, many concepts end up confusing entrepreneurs, because it isn’t always easy to understand why one piece of data is in fact important and needs to be analyzed.
One of these indicators is the company’s net assets. Let’s talk about how to analyze it.
What are net assets after all?
Every company has assets, doesn’t it? Computer equipment, fleets of vehicles, money in the bank, financial investments, real estate, etc. If for some reason you decide to cease all your company’s activities, would your company’s assets be enough to pay all its debts? Calculating your net assets will provide you with this answer.
Logically, no business intends to pack up shop. Every business acquires debts that stimulate its activities, generating assets that will pay for this acquired debt. Even so it’s very important to know the value of this calculation, because net assets are an indicator of your company’s financial health.
A company with negative net assets may lead its partners to believe that now is not the time to make investments, for example – they should place a priority on applying strategies that will economize resources.
How do you calculate net assets?
Net assets are the result of the following calculation: assets – liabilities. Assets appear on the left side of the balance sheet and represent all of the rights that the company will receive.
On the right side of the balance sheet are liabilities which reveal the company’s debts and obligations. Various things are included here such as company payroll, financing, loans, suppliers, etc.
A balance sheet with net assets of R$ 100 thousand indicates that if the company were to close its doors at that moment, the entrepreneur could pay all of the company’s debts and still leave the business with this amount of money left over.
That’s why it’s very important to have a goal of growing your company’s net assets each month – no matter how small it is.
Since net assets indicate the financial health of your company, they are considered by financial institutions when the time comes to offer a business loan. This is one more reason to focus on having a positive result, because your company may lose its access to lines of credit if its net assets are negative, and this could retard your company’s growth.
Suppliers may also want to rethink their partnership with you if your balance sheet indicates that your company already has many debts. It’s not usual, but it is possible. This calculation is recommended by accountants as one of the crucial figures to analyze when examining your company’s balance sheet.
Net assets: the numbers speak for themselves
The history of a company is written in numbers, and that’s why it’s very important to know how to correctly analyze your company’s net assets, but that’s not the only thing to keep an eye on.
Paying close attention to your company’s finances makes it easier to make strategic decisions, which will ensure the success of your business. That‘s why you can’t miss this article. In it we explain why financial management deserves your attention. Enjoy your reading!