Calculate the value of assets

Question

Candy and Barr form a partnership called ‘Candy‐Barr’ to combine their assets

and liabilities. Candy’s assets are worth R480 000. Her liabilities are R14 000.

Barr’s assets are worth R672 000. Her liabilities are R216 000. Calculate the value

of the partnership assets.

Answer 1

Hello, Boitumelo,

The partnership simply combines the two individuals' assets and liabilities:

The partnership has total assets of $720,000 and liabilities of $230,000. A common number often cited in the "net worth," which is assets minus liabilities ($490,000). But the question simply asks for assets ($720,000). Sounds impressive on its own, but if liabilities are higher than that amount, the company's net worth is below zero. But if sales are increasing quickly and the gross margin (sales price - cost) is good, hire an accountant to demonstrate a positive net present value before selling the company or taking it public.

Bob