NET ASSETS Definition

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NET ASSETS is the difference between total assets and current liabilities including non-capitalized long-term liabilities.

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OVERHEAD RATE is calculated by totaling all your expenses for one year, excluding labor and materials, and then divide this number by your total cost of labor and materials.

INCOME CAPITALIZATION: First you must determine the capitalization rate - a rate of return required to take on the risk of operating the business (the riskier the business, the higher the required return). Earnings are then divided by that capitalization rate. The earnings figure to be capitalized should be one that reflects the true nature of the business, such as the last three years average, current year or projected year. When determining a capitalization rate you should compare with rates available to similarly risky investments.

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