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Glossary of Credit Management Terms. Letter
N
Net income/Net loss:
Profit (or loss) after tax less extraordinary
items.
Net worth:
Indicates the financial strength of a company
and comprises:
- Issued capital
- Share premium A/C
- Capital reserves
- Any general reserves
- Profits and losses etc. (revenue reserves)
- Grants, donations etc.
Net worth is calculated as: total assets (not
including fictitious assets) minus current and long-term liabilities
(also known as net assets).
Many credit managers place more importance on tangible net worth,
i.e. net worth less any intangibles such as goodwill, formation
expenses, patents, etc. In simple terms net worth can be described
as what would belong to the shareholders if a company were to cease
trading, turn all assets into cash and settle all liabilities (assuming
that the balance sheet figures would translate into the actual cash
figures represented).
Nominal Capital:
This is the amount of money that can be put
into a Limited or Unlimited company in the form of shares. For Public
companies this is known as Authorised
capital. The term
Registered capital is also sometimes used. Nominal capital is
divided into shares which can be of different classes and values.
Different classes of shares may carry varied voting rights, divided
rights etc.
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