(post first made in dec 12)

I have seen companies form and dissolve all over the world. I understood how difficult it is to get the wheel spinning and what happens when you get off the Tiger.

My own experiences when i was an "Employee" and also when i was a "Entrepreneur". The stories you hear from the clients and the suppliers. New Disruptive Technologies, Govt. policies, Competitors and Regional Prosperity; these can redefine your companies role and position. Adapt, Innovate, Change or have an ability to go to a Quiescent State till you get the next big idea.
StockWorth is the Highest valuation of a business entity, from the time of IPO to the Speculative Trading, it is always an  over estimate. Sometimes it is very gross and excessive estimate, which leads to a lot of jugglery later.

NetWorth is supposed to be more realistic, a summation of Real and Virtual - Assets and Liabilities. If well audited and conservatively numbered with adequate cushions, then this is close to the Real value of a well managed firm.

ScrapWorth is what we recover from a firm, when it winds up or the investors and lenders want their money back. This should not happen in panic. When firm performs badly, it reflects as stock erosion, allow takeover or merger. 

Keep Reserves, control ownership. Company should not become a victim at the hands of a insecure lender or ambitious  investors. A difficult patch may pass over, a new opportunity may come by. Hibernate and watch. 

Many tools are used to get a stock high and keep it afloat, then doctoring the books to please the media and shareholders. This may show up sooner or later, better to stick close to facts.

Let us assume an Organization has equal Real and Virtual Assets. Cash, Factory and Machines worth 5 Million, Active Product line, Brand and Technologies worth 5 Million. Liabilities are Nil.

It has been generating a profit of around 500K on the average for the past three years. 20 times 500K gives 10M right. So for this type of Niche, this type of region and this Time frame; the Thumb rule is 20 times profit is Networth.

Networth - Real or Tangible Assets = Virtual Assets (math)

This is a rough way of enumerating Virtual Assets which we might Overvalue many times. Tangible can be measured after depreciation due to wear or appreciation due to market forces. Intangible can only be evaluated from companies performance.

An excellent Product line and good sales coupled with big inventory build up, bad business decisions and luxurious splurges gets you a net loss. Even though the company has a great selling product line, a bad management has eroded the Intangible Assets.

Mismanagement is a Virtual Liability, Technology when Outdated too. Virtual Assets are a Summation of Marketing and Management performance too.
  
If the Profit is Negative (loss), Then Networth is negative, deducting the Tangible from that, we still get a larger negative number. This reflects a large Virtual Liability, a Virtual Asset that turned Negative. So need to Turn Around.

Above Execution is Implementation,
Beyond Implementation is Management,
Greater than Management is Governance,
Superior to Governance is Regulation.
Any one gets rusted the Machine fails.

- San BB 2002

Networth = (Real Assets - Real Liabilities) + (Virtual Assets - Virtual liabilities)

Real assets : resale value of land, building, machinery, movables, cash etc.
Real Liabilities : loans taken, payments due, penalty, wear and tear.

Virtual Assets : brand name, customer base, vendor base, technologies, trained manpower etc.
Virtual Liabilities : legal risks, obsolescence, competition, wrong policies, wrong projections etc.

 - BB of San 2002

Haste makes waste, Abnormal Speed will do much damage.
What is essential for healthy bizness is ........

Reliability, Repeatability, Consistency and Predictability.

Remember.... Deadlines are for Dead Men.

 - My Notes from the Nineties

Sample Records of Big Bizness...........

Transaction	Debit	Credit	Balance
Paid to Tom	3000.00	0.00	-3000.00
From Tom	0.00	3000.00	0.00
From Jim	0.00	4000.00	+4000.00
Paid to Tom	3000.00	0.00	+1000.00
Paid to Jim	4000.00	0.00	-3000.00
From Tom	0.00	3000.00	+0.00
Grand Totals	10000.00	10000.00	0.00

Wow we did a bizness of 10K.....................

Many times after a lot of purchases and deliveries, many years of profit and loss, sometimes just an year. The outcome is zero. Yet virtual assets like IP, brand, training for firm and employment generation for the country has been achieved.  

Virtual assets are difficult to measure, many times over estimated and very easily erode.

Example -

Patents for a product may become obsolete due to an innovation elsewhere

Trained Manpower may leave, due to change in management practices.

First Online 2001 Improved Now