The Term NAV or Net Asset Value is used by investment companies for measuring net assets. This value is calculated by subtracting liabilities from the value of a fund’s securities and other items of value and dividing this from the number of outstanding shares. This value is commonly used in newspaper mutual fund tables for allocating the price of per share for the fund. NAV is used in relation to collective investment schemes and it may also be used as a synonym for the firm’s book value.
Net Asset Value is calculated every day when the share market takes place and the closing market value of all securities owned with all other assets for example cash, subtracting all the liabilities and then dividing the result (total net assets) with the total number of outstanding shares. Calculation of mutual fund NAV is very simple. It is typically calculated on a per-share basis. The formula for calculation is as under: -
NAV = (Market Value Of All Securities Held by Fund + Cash and Equivalent Holdings - Fund liabilities)/ Total Fund Shares outstanding
Net Asset Value of the fund will change daily as the value of the securities of a fund, cash held, liabilities and the numbers of shares outstanding fluctuate. For example, if a fund had net assets of Rs.50 lakh and there is one lakh shares of the fund, then the cost of per share will be Rs.50.00.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment