Have you ever heard the term Net Asset Value, or NAV? Net Asset Value is a company’s total assets minus its total liabilities. Basically, how much is your company worth after they’ve dealt with the investments hoover al that they have to take care of? The Net Asset value is mainly calculated for an exchange-traded fund (ETF) or a mutual fund; they are required by law to calculate these once a day.
The company which distributes the mutual fund or ETF takes their NAV for the day and divides that by the number of outstanding shares (ones that have not been sold back to the company and are still in the hands of investors) in order to discover their per-share NAV.
For example, if a company has an overall NAV of $100,000 (first off, they’re in trouble, but I’m just using that number for simplicity’s sake), and the investors have 10,000 of those stocks, the per-value NAV is $10. Because of the law, many mutual funds and ETF’s make a point to publicize their NAV via the media (Newspapers, the Internet, etc).
Why is this important to a company with stock in the market? The NAV helps a company see how well they are doing. They are able to compare their NAV’s with other NAV’s of similar companies and with the stock market in general. From this, they are able to discern a couple of things, like growth potential and goodwill value.
These numbers help you to look at the general health of the company and allow you to see what could be next for that company to try and face in the future. If the percentage difference between the NAV and market value is too much, then it may be time to throw in the towel and close the company before bankruptcy needs to be filed.