Net operating assets

A method of valuing a business based on its operating activities. It’s calculated by subtracting the company’s operating liabilities from its operating assets.

Where have you heard about net operating assets?

The net operating assets (NOA) calculation is often used when valuing companies outside of the financial industry. By reformatting the balance sheet to remove financing activities that don’t create value, the valuation is based purely on the company’s operating activities.

What you need to know about net operating assets.

Operating assets are the assets a business uses to generate revenue. For example, accounts receivable, inventory and fixed assets such as plant or equipment. Operating liabilities are what the business owes others and can include accounts payable, accrued expenses and tax payments.

When calculating NOA, all financial assets and liabilities (including cash, marketable securities and long-term loans) are removed from the calculation. This means that the operating performance of the business can be valued independently of the financing performance, giving a more accurate valuation of the company.