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Net Trading Assets

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Our lovely Directors have decided to set up a bonus scheme and one of the measurables will be Net Trading Assets.  As the finance person, I've been asked to calculate what these are.  I've never come across this particular wording, and I have spoken to our Accountants practice and they haven't heard of them either!

Does anyone know what they are and should and shouldn't be included? I'm guessing Current Assets less Current liabilities, but does Bank and Fixed Assets get included?

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By GW
04th Oct 2019 11:09

I would guess Total net assets less investments, directors balances and anything similar. If the directors have come up with the scheme why not ask them for their definition of Net Trading Assets?

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Replying to GW:
RLI
By lionofludesch
04th Oct 2019 11:38

GW wrote:

If the directors have come up with the scheme why not ask them for their definition of Net Trading Assets?

This ↑

It's their scheme, their idea, they make the rules.

No-one on here knows what's in their mind.

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By paul.benny
04th Oct 2019 11:18

Great. They've designed a scheme without defining the variables and without involving the people that to understand and that actually have to calculate the results.

Rant over, I would say include fixed assets (tangible and intangible), net current assets but excluding cash and debt. I'd also calculate the measure as a monthly average to deter attempts to manipulate year end balance sheets.

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By Tax Dragon
04th Oct 2019 11:25

Or... it's all well defined and someone needs to read the scheme documents.

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By CJaneH
04th Oct 2019 11:29

I can understand that bonus's might be paid based on gross profit or net profit but why Net Trading assets?

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By Tim Vane
04th Oct 2019 22:47

Is it a fishing business? If so, the answer is much simpler.

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By atleastisoundknowledgable...
05th Oct 2019 18:10

I’d say; cash + TDs - TCs - HMRC debt. (Assume any similar items are included as relevant).

Or maybe Net Current Assets less loans etc? Although that could easily leave a very high figure. (ie incl cash but not loan)

Bottom line, just ask them what they understand by the term, get them to clarify.

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Hallerud at Easter
By DJKL
05th Oct 2019 21:58

The key question is what are they trying to measure by it, presumably some form of management/stewardship success, but what precisely?

For instance if one is measuring some form of increase in net assets ,as a proxy for success, how does dividend policy fit in with the measure, if all profits distributed any increase might be somewhat muted.

What they are trying to achieve ought to hopefully narrow down what ought to be measured and how.

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