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Definition
Net assets are total assets minus total liabilities — what would remain for the owners if the company paid off everything it owes. Equal to shareholders' equity, it is a snapshot of the company's underlying worth.
Why it matters
Positive and growing net assets signal strength; negative net assets are a warning of insolvency. Some loans include a net worth covenant requiring a minimum. See lowering gearing.
Related reading
Net worth covenant
A loan condition requiring a company to keep its net assets above an agreed minimum for the life of the…
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Insolvency
When a company cannot pay its debts as they fall due, or its liabilities exceed its assets — a state that…
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Gearing ratio
The gearing ratio compares a company's debt with its equity — high gearing means heavy reliance on borrowing,…
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Solvency
A company's ability to meet its debts as they fall due, and to hold assets greater than its liabilities — a…
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