When thinking about your financial future, it’s helpful to have a baseline idea of the progress you’re making. That’s why we came up with the adjusted tangible net worth calculation.
Adjusted Tangible Net Worth
It is the term used to describe the net worth of a company after subtracting intangible assets and adding back goodwill.
Adjusted tangible net worth is calculated as:
ATNW = Tangible Net Worth + Goodwill – Intangible Assets.
Tangible net worth is calculated by subtracting intangible assets, such as patents and goodwill, from total assets. Tangible net worth helps provide an idea of how much the company would be worth if it were liquidated.
Adjusted tangible net worth is a financial ratio that looks at the relationship between tangible assets, liabilities and owner’s equity (the balance sheet). The adjusted tangible net worth ratio is defined as follows:
Use of Adjusted Tangible Net Worth
The bank will want to know that your business has enough capital to maintain its operations and pay off any debts it incurs. So it will want information on the amount of equity in your business.
This is where you’ll need to provide a balance sheet, which lists all of your assets, such as inventory, accounts receivable and real estate, and subtracts all liabilities. The remaining figure will be your adjusted tangible net worth, which you can use as an indication that you have enough capital to support your loan application.
Net Tangible Worth
Net Tangible Worth is a term used to describe the assets of a company minus its liabilities. It is an important figure because it represents the assets that would remain if all liabilities were paid off. The net tangible worth of a company is used to determine whether or not the company has sufficient assets to cover any short-term liabilities.
The two main components of net tangible worth are tangible assets and intangible assets. Tangible assets include property, equipment and other types of physical items that can be sold if necessary. Intangible assets are those that cannot be physically sold, such as goodwill, intellectual property or patents.
In order to arrive at a company’s net tangible worth, all intangible assets must be subtracted from its total assets. From there, all outstanding liabilities are subtracted from the remaining asset total to arrive at its net tangible worth