What is meant by the term net asset value?
This term is usually (but not exclusively) used in the same breath as Investment Trusts. The net asset value (NAV) is a company’s total assets, less its liabilities, in relation to the number of shares in issue and is usually expressed in pence per share. For example, company A has £25m in assets, £5m in liabilities and 40m shares in issue. The NAV is therefore 25m less 5m divided by 40m = 50p per share. Investment Trusts where the share price is less than the NAV are said to be trading at a discount (or a premium if the opposite applies). This is of particular interest to value investors, who wish to know the worth of their investment in intellectual property shares, or other knowledge based shares it is much less of an issue, since the assets for those companies are largely intellectual rather than physical.
