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ACCTG 115 Lecture (01-27-2022)

The document discusses valuation concepts and methods presented in an accounting lecture. It defines net asset value as the value of a fund's assets minus its liabilities, commonly used to value mutual funds. The formula for NAV is presented as assets - liabilities. An example calculation shows a fund with total assets of $114 million, total liabilities of $13 million, and a resulting NAV of $5.04975 per share based on 20 million outstanding shares. Cash flow problems are also presented comparing net income between two scenarios with different sales levels and expenses.

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43 views

ACCTG 115 Lecture (01-27-2022)

The document discusses valuation concepts and methods presented in an accounting lecture. It defines net asset value as the value of a fund's assets minus its liabilities, commonly used to value mutual funds. The formula for NAV is presented as assets - liabilities. An example calculation shows a fund with total assets of $114 million, total liabilities of $13 million, and a resulting NAV of $5.04975 per share based on 20 million outstanding shares. Cash flow problems are also presented comparing net income between two scenarios with different sales levels and expenses.

Uploaded by

Janna Mari Frias
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ACCTG 115 Valuation Concepts & Methods, Lecture (January 27, 2022)

Slide 3: Review

Balance Sheet Total Assets: 25 million

Total Intangible Assets: 15 million

Total Liabilities: 10 million

Compute Total Value of Tangible Assets = 0

Slide 4: What is Net Asset Value

Net Asset Value (NAV) is defined as the value of a fund’s assets minus the value of its liabilities.

- Commonly used in mutual funds

- Used to determine the value of the assets held.

- According to SEC, mutual funds and Unit Investment Trusts (UITs) are required to calculate
their NAV at least once every business day.

Slide 5: Formula for Net Asset Value

Net Asset Value = Value of Assets – Value of Liabilities

Value of Assets = The Value of all the securities in the Portfolio

Value of Liabilities = The Value of all liabilities and fund expenses (such as staff salaries, management
expenses, operational expenses, audit fees, etc.)

Note: The NAV is typically represented on a per-share basis. In such a case, the formula would be:

Outstanding Shares are on the hands of the shareholders, owned by hand of the shareholders.

* Treasury Shares are not included, and Dividends.


Slide 6: Example

Securities in Portfolio: 75 million

Cash & Cash Equivalent: 15 million

Accrued Income: 24 million

Total Assets = 114,000,000

Liabilities: 1 million(ST) + 12 million(LT)

Accrued Expense: 5,000

Total Liabilities = 13,005,000

100,995,000 / 20,000,000 = 5.04975

Net Asset Value represents the whole value of the company shares.

Fair Asset Value is the amount of how much you can sell the company shares.

CASH FLOW PROBLEMS:

1.

A.

Sales 900,000

COGS 540,000

Gross Profit 360,000

Expenses 90,000

Depreciation 10,000

Interest Expense 8,000 (108,000)

Income before taxes 252,000

Less: Income Taxes(30%) (75,600)

Net Income 176,400


B.

Sales 1,000,000

COGS 500,000

Gross Profit 500,000

Expenses 120,000

Depreciation 10,000

Interest 15,000 (145,000)

Income before Taxes 355,000

Less: Income Taxes (106,500)

Net Income 248,500

248,500 – 176,400 = 72,100 increase

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