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June 2015 Question 3 c (Bento)

This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.

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August 20, 2018 at 1:49 pm #468605
Ng
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Hi John,
When doing the net asset valuation for the new company, Why do we not deduct from the total assets the 30 million bond and convertible loan as they are liabilities belong to the company?
Isn’t net valuation asset method formulas total assets – total liabilities?
Please help me clarify. Thanks for your time.
August 20, 2018 at 3:51 pm #468625
John Moffat
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The value of a company is equity plus long-term debt (i.e. the total capital, which is equal to total assets less current liabilities).
If they wanted the value of the equity then you would deduct the long-term borrowings.
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