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Hello Sir,
Hope you are fine!
Sir I wanted to confirm if the value of share capital and reserves (book value) is also included In calculating the asset value of a company using net realisable value and replacement cost?
And is there any specific pattern of what should be included in each net realisable value and replacement cost?
In Prey Co MTQ in kaplan exam kit Q24, in calculating the asset value of the companys shares using net realisable value, the book value of the asset is subtracted with an addition of its sale value and share capital and reserves bookvalue.
Only thing that bothered me was inclusion of share capital and reserves figure.
Please clarify Sir if share capital and reserves will be included in all calculation of asset value of a company using these approaches!
Thank you sir!The asset value of a company is equal to the total value of the assets less the total value of the liabilities. Share capital and reserves do not come into it.
If asset value is based on book values, then it will be equal to share capital plus reserves – this is basic financial accounting from Paper FA (was F3). If it is based on NRV or replacement cost, then it will not be equal to share capital plus reserves.
Have you watched the free lectures on the valuation of businesses?
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