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What is Net Asset Value?

The Net Asset Value is calculated by adding all assets, subtracting all liabilities, and dividing them by shares outstanding.

What is Net Asset Value?

Net Asset Value is used chiefly for open-end mutual funds. Net Asset Value is calculated by summing all the assets, subtracting them by all fund liabilities, and then dividing by the total shares outstanding. Net Asset Value is calculated daily at the closing of the market.

Example of Net Asset Value:

Net Asset Value =$ \frac{Fund\, Assets-Fund\, Liabilities}{Total\, Shares\, Outstanding} $

Let’s take an example where a company has Fund Assets of USD 100mn and Fund Liabilities of USD 70mn. If the Total Shares Outstanding are 100,000, the Net Asset Value would be

Net Asset Value =$ \frac{100,000,000-70,000,000}{1,000,000}=30 $

Why is Net Asset Value important?

Net Asset Value assists investors in knowing the actual value of the assets after incorporating all the liabilities. One single number gives the value of the assets and is used vividly in the mutual fund industry.

Ajinkya Gawande
1 min read
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