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Valuation of Shares - Net Assets Value Method Video Lecture | Advanced Corporate Accounting - B Com

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FAQs on Valuation of Shares - Net Assets Value Method Video Lecture - Advanced Corporate Accounting - B Com

1. What is the Net Assets Value method for valuing shares?
Ans. The Net Assets Value method calculates the value of a company's shares by subtracting its total liabilities from its total assets, then dividing the resulting net asset value by the number of outstanding shares.
2. How is the Net Assets Value method different from the Earnings Per Share method?
Ans. The Net Assets Value method focuses on the company's assets and liabilities to determine the value of its shares, while the Earnings Per Share method evaluates the company's profitability by dividing its total earnings by the number of outstanding shares.
3. Can the Net Assets Value method be used for all types of companies?
Ans. The Net Assets Value method is more suitable for asset-rich companies such as real estate or investment firms, as it emphasizes the company's balance sheet strength rather than its earnings potential.
4. How accurate is the Net Assets Value method in determining the true value of shares?
Ans. The Net Assets Value method provides a more conservative estimate of a company's share value compared to other valuation methods, as it focuses on tangible assets and liabilities rather than future earnings projections.
5. What are the limitations of using the Net Assets Value method for share valuation?
Ans. The Net Assets Value method may not take into account intangible assets such as brand value or intellectual property, and it may not reflect the company's future growth potential or market conditions, leading to potential undervaluation of the shares.
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