What if tangible net worth of a company is negative?

Answer 1

Nta is calculated as the total assets of the company subtract any intangible assets such as goodwill and trademark, less all liabilities.

The nta essentially represents the book value of an organization or individual and may be used to determine the sustainability of the company.

However, if the nta of the company is negative this does not mean the company is insolvent. This means the company held more intangible assets than tangible. Also this ratio is good to used when determine whether or not to purchase a stock of a certain company.