This fixed assets to net worth ratio calculator measures the solvency of a company by finding the proportion of the net fixed assets against its net worth. There is more info about the formula applied below the tool.
How does this fixed assets to net worth ratio calculator work?
The algorithm behind this fixed assets to net worth ratio calculator applies the formula explained below:
FANW = Net fixed assets / Net worth
Fixed assets consist of plants, properties or equipment.
Net worth refers to the difference between the total assets figure and the liabilities of an entity. More specifically:
In case of a business, the net worth is calculated as thetotal assets minus total liabilities, as presented in the balance sheet.
Typically assets consist of:
While liabilities include:
In case of an individual net worth is obtained by subtracting its debts and liabilities owed from total assets owned.
Personal assets include:
- Cash in bank
- Personal investments
- Value of house in case if sold
- Value of autos if sold
- Value of jewelry, furnishings or of any other valuable objects if sold.
Debts may include:
- Mortgage debt
- Personal loan
-Credit card negative balance
In the specialty literature, net worth is often referred to as thecapital employed (CE). This is usually calculated as:
CE = (Equity share capital + Preference share capital + Value of reserves + Long term liabilities) - Fictitious assets
The interpretation of the fixed assets to net worth ratio level
A ratio equal or greater than 0.75 (75%) is interpreted as a negative signal that the entity in question is vulnerable because of a low solvency level, while a value below the given limit is considered acceptable. However please note that the fixed assets term may be interpreted in different ways from one standard to another.
Example of FANW ratio calculation
Let’s assume that a supermarket has the following simplified situation:
Net fixed assets of $1,000,000
Net worth of $1,500,000
In this case the FANW ratio is $1,000,000 / $1,500,000 is 0.67 (66.67%).29 Apr, 2015 | 0 comments