Capital Gain or Capital Loss Definition & Meaning | Financial Term | CSIMarket
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Glossary

Capital Gain or Capital Loss

Financial Term

Capital gain and capital loss refer to the increase or decrease in the value of an asset over time when it is sold or exchanged. In financial industry, capital gain or loss is used to measure the profitability of an investment.

Capital Gain: It is the increase in the value of an asset between the time it is acquired or purchased and the time it is sold or disposed of. It can be realized or unrealized. Realized capital gain is when an asset is actually sold for more than its purchase price. Unrealized capital gain is when the value of an asset increases, but it is not realized until it is sold.

Capital Loss: It is the decrease in the value of an asset between the time it is acquired or purchased and the time it is sold or disposed of. Like capital gain, capital loss can also be realized or unrealized. Realized capital loss is when an asset is actually sold for less than its purchase price. Unrealized capital loss is when the value of an asset decreases, but it is not realized until it is sold.

In the financial industry, capital gain or loss is used to measure the performance of an investment. Investors use it to decide whether to hold or sell assets. Capital gains and losses affect an individual*s tax liability, in most countries, where taxes are levied on capital gains. Hence, capital gain or loss has significant importance in financial industry.


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