Net Current Asset Value (NCAV)

Net current asset value (NCAV) is a company's current assets minus its total liabilities. Current assets are what the company expects to turn into cash within a year (cash, money owed by customers, inventory). Unlike working capital, which subtracts only current liabilities, NCAV subtracts every liability, including long-term debt, so it is a deliberately strict measure. Dividing NCAV by the number of shares gives NCAV per share. Benjamin Graham used it in the net-net test: he looked for companies whose share price was below two-thirds of NCAV per share. The test ignores buildings, machinery and brands altogether, which is why it only ever flags a very particular kind of company.

Worked example

Why it matters

NCAV answers a blunt question: if the company stopped trading and paid off every debt, how much of its short-term assets would be left for the shareholders? Graham liked it because it is a cautious yardstick that does not depend on guessing future profits. The figures come from the balance sheet in the annual report. The catch is that book values are not sale values: inventory can be written down and customers can fail to pay. Such companies are often small, unloved or shrinking for a reason. A pass is a question to look into, not a verdict, so read the company's losses, cash burn and debt before drawing any conclusion.