Net Tangible Asset Value

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Definition: Net Tangible Asset Value

The Net Tangible asset value is a measure (in terms of the fair market value) of the total physical assets (cash, inventory, accounts receivable etc.) owned by a company minus the liabilities (accounts payable, debt etc.) and the par value of preferred shares held. All the tangible assets such as patents, goodwill and trademarks are also subtracted from the tangible assets.


It is an important parameter because the amount the net tangible asset is often studied in business before making investments. For example a company with high Net Tangible Asset will have low risk of investment and also high ability to make a new acquisition. These are the assets that can be readily converted into cash in case of bankruptcy. It gives a good indication about the liquidity of a company.


Formula:

Net Tangible Asset Value = Total Assets - Total Liabilities - Intangible Assets - Par Value of Preferred Stock

 

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