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Capital Gains |
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Capital gainsProfits an investor makes from the sale of real estate or investments.Capital GainsGains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.Capital Gains Similar MatchesCost of limited partner capitalCost of limited partner capitalThe discount rate that equates the after-tax inflows with outflows for capital raised from limited partners. Capital growthCapital growthIn general terms, the increase in value of an asset.As far as shares are concerned, capital growth is an increase in share price compared to what you paid, and is one of the elements of what investors called 'total return', the other component being income through dividends.Research has shown that investing in shares over the last 50 years produced a better total return than investments in bonds or deposits, and capital growth has been a major part of that superior performance. There is certainly no guarantee that shares will continue to outperform other investments, but most observers believe that they will over the long term. Capital structureCapital structureThe components which form a company's capital :ordinary shares, preference shares, debentures and loan stock.In the US, the equivalent components are: common stock, long term debt and preferred stock. Short term capital gainShort term capital gainA profit on the sale of a security or mutual fund share that has been held for one year or less. A short-term capital gain is taxed as ordinary income. Return on capital employedReturn on capital employedA measure of a company's profitability. It may be defined as:Earnings before interest and tax divided by total capital employed plus short term borrowings minus total intangibles.ROCE takes all the assets employed in the business, including borrowings, and measures the return the company made on them. If a company has a low ROCE, it is using its resources inefficiently, even if its profit margin is high.Calculation: multiply operating profit by 100, and divide the result by total capital employedExample: Company A made an operating profit of £897m on total capital employed of £4,342m. ROCE was therefore (897 x 100) / 4,342= 20.66%Yardstick: A company's ROCE should be higher than the return on gilts (the benchmark for a risk-free investment return). And unless it is higher than the cost of borrowing, any increase in the company's borrowings or the general level of interest rates will reduce shareholders' earnings. A ROCE of 20% or more is considered very good. Further SuggestionsCapital accountCapital flight Capitalization method risk capital Crony capitalism Other capital Capital scarce share capital Human capital capital shares capitalisation issue capitalisation capital Marginal efficiency of capital Working capital management capital allowance Unrealized capital gain or loss capital movement Capital mobility Capital appreciation Long Term Capital Gain Pie model of capital structure Capital International Indexes Capital-saving Capital intensive |
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