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What does net net mean in value investing?


Asked by Cohen Nixon on Dec 14, 2021 vb.net



What Is Net-Net? Net-net is a value investing technique developed by the economist Benjamin Graham, in which a company's stock is valued based solely on its net current assets per share (NCAVPS).
Consequently,
DEFINITION of 'Net-Net'. The net-net investing method focuses on current assets, taking cash and cash equivalents at full value, then reducing accounts receivable for doubtful accounts, and reducing inventories to liquidation values. Total liabilities are deducted from the adjusted current assets to get the company's "net-net" value.
Besides, Net-net value is calculated by deducting total liabilities from the adjusted current assets. The net-net value investing strategy uses a company’s net current asset value for valuation purposes.
In respect to this,
Current assets, which are used in the net-net approach, are defined as assets that are cash, and assets that are converted into cash within 12 months, including accounts receivable and inventory. The net-net investing strategy does not consider long-term assets or liabilities, making it unreliable for long-term investments according to its critics.
Moreover,
This figure provides a sense of the real expenditure on durable goods such as plants, equipment, and software that are being used in the company's operations. Net investment indicates how much a company is spending to maintain and improve its operations.