What are Net Tangible Assets?

Net tangible assets refer to all the physical, tangible things a company actually owns, after all the things that a company owes are subtracted. In other words, the net tangible assets are all the things a company could sell to get money, minus all the things it would then have to pay back out of the proceeds. Intangible assets are excluded.

Companies own many different things. The company owns tangible items such as the building it operates from, the desks and chairs its staff sits in, the computers its staff works on, and the goods the company produces and sells. Real estate as well is considered a tangible asset since it is a physical item that could be sold or transferred.

A company also owns intangible items, or items that it isn't quite so easy to put a quantifiable value on and sell. For example, a company's brand name and brand recognition is an intangible asset. Apple®, for example, has a recognizable brand name and image. It is difficult to put a dollar value on exactly how much its brand name and brand reputation are worth. The brand name and image are also not physical, tangible assets.

Each company also has liabilities at a given time. One such liability comes in the form of shares of stock the company has issued. When a company issues shares of a stock, other investors buy those shares and become part owners of a company. As such, the stock the person owns has value and the person owns a portion of the company's assets. This means that when a company calculates its net tangible assets, it has to subtract the value of all of the outstanding stock shares it owes, since those people also own a portion of its assets equal to the value of the amount of stock it has issued.

Other liabilities that must be subtracted from net tangible assets include accounts payable, or money owed to creditors for various things such as materials and goods the company has purchased. If the company has a mortgage on property or a business loan, this is also a liability that must be subtracted. Subtracting all of the liabilities, including the value of the stock, will provide a number that refers to the net tangible assets a company has in its possession.