Net asset value
) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end or mutual funds, since shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net asset value. This may also be the same as the book value or the equity value of a business. Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding
held by investors, thereby representing the net asset value per share
Net asset value and other accounting and recordkeeping activities are the result of the process of fund accounting (also known as securities accounting, investment accounting, and portfolio accounting). Fund accounting systems are sophisticated computerized systems used to account for investor capital flows in and out of a fund, purchases and sales of investments and related investment income, gains, losses and operating expenses of the fund. The fund's investments and other assets
are valued regularly; daily, weekly, or monthly, depending on the fund and associated regulatory or sponsor requirements. There is no universal method or basis of valuing assets and liabilities for the purposes of calculating the net asset value used throughout the world, and the criteria used for the valuation will depend upon the circumstances, the purposes of the valuation and any regulatory and/or accounting principles that may apply. For example, for U.S.-registered open-ended funds, investments are commonly valued each day the New York Stock Exchange is open, using closing prices (meant to represent fair value
), typically 4:00 p.m. Eastern Time. For U.S.-registered money market funds, investments are often carried or valued at "amortized cost" as opposed to market value
for expedience and other purposes, provided various requirements are continually met.
At the completion of the valuation process and once all other appropriate accounting entries are posted, the accounting books are "closed" enabling a variety of information to be calculated and produced including the net asset value per share.