NCAVBenjamin Graham (1934)
NCAV (Net-Net Liquidation) Calculator
NCAV measures the liquidation floor by taking liquid current assets, subtracting all liabilities and preferred claims, and setting long-term fixed assets to zero.
Calculator Inputs
Balance Sheet > Total Current Assets
Balance Sheet > Total Liabilities
Theoretical Foundation & Equation
The Net-Net method values a business strictly on liquid working capital that could be realized in a rapid orderly wind-down, assigning zero value to property, plant, equipment, or intangibles. Graham recommended purchasing below 66.7% of NCAV.
Core Intrinsic Formula
NCAV per share = (Current Assets - Total Liabilities - Preferred Stock) / Diluted Shares | Graham Buy Target = NCAV × (2 / 3)
Variable Definitions & Disclosure Guidance
| Symbol | Variable Name | Description | Filing Source Guide |
|---|---|---|---|
| Current Assets | Total Current Assets | Cash, short-term investments, accounts receivable, and inventory convertible to cash within 1 year | 10-K Balance Sheet: Total Current Assets |
| Total Liabilities | Total Liabilities | All current and long-term liabilities owed to third parties | 10-K Balance Sheet: Total Liabilities |
| Preferred Stock | Preferred Stock & Minority Interest | Senior equity claims prior to common shareholders | 10-K Balance Sheet: Preferred Equity |
Financial Intuition: If an investor can acquire a business for less than its net cash and current assets after paying all debts, the entire operational earnings power and fixed plant are acquired for free.
Step-by-Step Worked Example
Classic deep-value liquidation benchmark.
Sample Financial Filing Inputs
Current Assets
$100M
Balance Sheet Current Assets
Total Liabilities
$40M
Balance Sheet Total Liabilities
Diluted Shares
10M Shares
Common Shares Outstanding
Calculation Steps
Step 1: Calculate Total Net Current Asset Value$60M Net Working Capital
$100M - $40M = $60M Total NCAV
Step 2: Compute NCAV Per Share$6.00 per share
$60M / 10M shares = $6.00
Step 3: Apply Graham’s 2/3 Margin of Safety Rule$4.00 Buy Target (33% Margin of Safety)
$6.00 × (2 / 3) = $4.00
Example Conclusion & Interpretation
NCAV per share is $6.00. Graham’s strict Net-Net entry price threshold is $4.00 or lower.
Suitability Checklist & Limitations
Best Suited For
- •Cash-rich micro-caps and neglected asset-heavy companies trading below net working capital
- •Deep value investors seeking an absolute liquidation margin of safety
Not Suitable For
- •Companies with negative net current assets (Current Assets < Total Liabilities)
- •Unprofitable cash-burning firms where liquid assets erode rapidly each quarter
Recommended Alternative Model
For profitable operating businesses, the Residual Income Model (S-RIM) is better suited.
Frequently Asked Questions
In a distressed liquidation, specialized factories and equipment rarely fetch book value. Assuming zero value creates an ironclad margin of safety.
Primary Citations & Source Documentation
Benjamin Graham & David Dodd (1934)
Security Analysis: Principles and Technique (1934)
View Source / Filing ReferenceLegal Caveat
- Always verify that inventory and receivables do not have high obsolescence or write-down risks.