Clarification on equity, liquidation value.

[ashparagon]

Just want to clarify the definition. Please correct me if I am wrong.

Equity = Assets - Liabilities

And the following terms: Shareholders’ Equity, Total Equity, Net Asset Value, Net Tangible Asset, Net Worth, and Book Value all meant the same thing. Correct?

Tangible Book Value = Assets - Intangible Assets - Liabilities

It's also know as Liquidation Value, am I right?

[Clement]

Just want to clarify the definition. Please correct me if I am wrong.

Equity = Assets - Liabilities

And the following terms: Shareholders’ Equity, Total Equity, Net Asset Value, Net Tangible Asset, Net Worth, and Book Value all meant the same thing. Correct?

Tangible Book Value = Assets - Intangible Assets - Liabilities

It's also know as Liquidation Value, am I right?

Hi,

Technically, the approximation is incorrect. For most companies, the balance sheet is prepared on a going concern assumption, so asset values on a balance sheet can differ from their realizable values in a liquidation.

[scottleey]

Total Equity, Net Asset Value, Net Worth, and Book Value are the same

Shareholders’ Equity (If you are referring to the parent company concept, then it is not equals to total equity. You have to account for noncontrolling interests. This is under the FASB No. 160 guidelines though so its US based. I am not sure of the IFRS guidelines. Also, it is not so much of a difference if you want the economic significance.)

Net Tangible Asset ( Equals to Net Tangible Book like you mentioned in your calculation)

Net Tangible Book like what Clement said is incorrect. You have to understand the numbers:
For example,
Inventories that are booked differs significantly (Compare gold with readily accessible prices and apparels which usually experience rapid lost of value)
PP&E are booked at cost and realizable value may defer significantly (An inefficient steel mill should be worth considerably less in comparison to book than say a printing press. This is only my subjective assessment depending on how you depreciate those assets.) Some properties are booked at cost with no transactional market to show true worth.
Liabilities (Bonds may be selling at a premium or discount in the active market. In the event of liquidation, pari passu might not exist even if assets < liabilities depending on the bankruptcy process which is Chapter 7 under US bankruptcy code.)