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.

Net fixed assets:*
Net worth:*

## 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:

-Fixed assets

-Inventory

-Marketable securities

-Cash

-Accounts receivable

-Prepaid expenses

While liabilities include:

-Debt

-Accounts payable

-Accrued liabilities

• 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

-Auto loan

-Credit card negative balance

-Other debts.

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