Current assets comprising cash, marketable securities, accounts receivables and inventories represent the most liquid of assets on the company’s books, convertible to cash in the shortest of times. In a liquidation scenario, accounts receivables are collected, and marketable securities and inventories sold for cash to pay off liabilities.
Two “versions” of net-nets have evolved from teachings by Benjamin Graham in his two books “Security Analysis” and “The Intelligent Investor.”
The first version of net-nets revalues NCAV:
+100% of face value of cash
+75% of face value of receivables
+50% of face value of inventories
-100% of face value of all liabilities
The second version of net-nets takes all NCAV at 100% of face value, but advises investors to buy at P/NCAV