What is meant by the term "net asset value"?

The term "net asset value" refers to the difference between an entity's total assets and its total liabilities. This figure provides a clear picture of the equity or ownership interest that shareholders have in a company or investment fund. It is a fundamental measure used in finance and accounting to assess a company's financial health, as it indicates what would be left for the shareholders if all assets were liquidated and all liabilities were paid off.

In the context of investment funds, net asset value is crucial for determining the price at which shares of the fund will be bought or sold. It effectively reflects the value that one share of the fund represents in terms of the actual, underlying assets it holds after addressing any obligations. This concept is integral for both investors and management, as it assists in understanding the intrinsic worth of the entity relative to its liabilities.