The NTA (Net Tangible Asset) approach of valuing a company or business is based on the aggregate value of all the assets of te company in their existing condition, after deducting the sum of all liabilities and intangible assets. It is meaningful as it shows the extent to which the value of each share is backed by tangible assets and would be relevant in the event that the company decides to realise or convert the use of all or most of its assets.
The NTA approach provides an estimate of the value of a company, assuming the hypothetical sale of all its assets over a reasonable period of time at the aggregate value of the assets used in the computation. The proceeds of which are used to settle the liabilities, minority interest and obligation, and the balance is to be distributed to the shareholders. The value of the assets are measured in historical costs. Obligations and intangible assets are being determined as the values as recorded in the financial statements.
It should be noted that intangible assets such as goodwill, trademarks and brand names are not taken into consideration. Hence, the use of NTA may not be reflective of the true valuation of the assets owned.
