Theories & Further Information About Net Assets

As we have seen from the explanation of net assets, the net assets are composed of the fixed assets and the current assets less the current liabilities and the long-term liabilities. This means that they are a measure of the total worth of the business - what it should be worth if it was shut down tomorrow and all its debts paid. However, it is extremely unlikely that it would actually be worth this sum, as many assets would be worth a very different amount if you actually tried to sell them. What may be an invaluable machine to one company may be a worthless lump of scrap-metal to most others.
If this is true that they represent the total worth of the business at any moment in time, then we can use the net assets as a measure of the size of the business. However, it is far from a perfect measure of the size of the business and there are various other ways of measuring the size of the business. These may include:-
1.Number of employees

2.Sales revenue / turnover

3.Profit
However, each of these measures have their problems as a method for measuring the size or value of a business.
The net assets will be shown on a balance sheet as the balancing figure - the one that matches the shareholder's equity.