Net Assets – Definition, Formula and Example

Net assets is the difference of total assets and total liabilities of a firm.

 

Net Assets Formula:

Net Assets

Net Assets Example:

The accountant of XYX Ltd comes with the below figure.

Total assets of company = INR 10,00,000

Total liabilities of company = INR 7,00,000

Management asks to calculate the net assets. He follows the order and makes his calculation as given below:

Net Assets = 10,00,000 – 7,00,000 = INR 3,00,000

Strike Price – Meaning and Example

Strike price is the fixed price at which holder of a call option can buy the underlying asset irrespective of its market price until the expiration of contract.

For a put option holder, it is the price at which underlying assets can be sold until the expiration of contract.

The strike price is determined at the time of entering into a derivative contract.

In a call option, if it remains lesser than the spot price (market price), the holder can exercise the option to earn profit.

On the other hand, in a put option, the holder of the option can earn profit only if strike price is more than the market price.

Example of strike price:

On 1st January 2018, Mr A entered into a derivative contract to buy 100 shares of company XYZ Ltd at a strike price of INR 85. The expiration date of contract is 3 months i.e. 31st March 2018. On 1st of January the market price was INR 82.

Strike priceIn the month of February, market price increased from INR 82 to 97. Mr A has the right to purchase the 100 shares of XYZ ltd at a price of INR 85 or Mr A can wait for further hike in share price till the expiration of contract.

In the month of February, market price increased from INR 82 to 97. Mr A has the right to purchase 100 shares of XYZ ltd at a price of INR 85 or Mr A can wait for further hike in price till the expiration of contract.