Net Asset Value (NAV);

Net Asset Value (NAV);

The net asset value or NAV of an investment company with the characteristics of a unit trust is the difference between total assets minus total liabilities. In the valuation of companies, NAV is calculated through the difference between the book value of assets and liabilities, and in mutual investment funds, NAV is obtained by deducting the debt of the fund from the daily value of the total portfolio.

Financial analysts often pay attention to the calculation of the second type of NAV because this is how the shares of the relevant company are priced.

For example, if the market value of investments and other assets of an investment company is 2000 billion Rials and its liabilities are 1200 billion Rials, on this date the NAV of this investment company will be 800 billion Rials.

Because the assets and liabilities of an investment company change daily, its NAV must also be recalculated daily. For this reason, in other countries, mutual funds (investment companies with variable capital) and “unit trusts” calculate their NAV at least once a day after the end of stock market trading and report it in newspapers.

The aforementioned investment companies calculate the NAV of each share by dividing the NAV by the number of shares outstanding. For example, in the above example, if the number of current shares of the company is 400 million shares, the NAV of each share will be calculated as 2000 Rials.

With the aforementioned logic, the NAV of each share should also be calculated daily. It should be noted that the number of current shares of such companies often changes daily. Because shares of investment companies with the characteristics of mutual funds or unit trusts can be redeemed at any time.

Mehdi Koh Soltani (financial services, accounting, financial and tax consultant):
Group of accountants, auditors, Tabriz
https://t.me/joinchat/BnzBsTuioTshiXBwf9bBPQ

This post is written by Mahdi_kohsoltani