Disinvestment

What is 'Disinvestment'

Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. Also known as "divestiture".

2. A reduction in capital expenditure, or the decision of a company not to replenish depleted capital goods.

BREAKING DOWN 'Disinvestment'

1. A company or government organization will divest an asset or subsidiary as a strategic move for the company, planning to put the proceeds from the divestiture to better use that garners a higher return on investment.

2. A company will likely not replace capital goods or continue to invest in certain assets unless it feels it is receiving a return that justifies the investment. If there is a better place to invest, they may deplete certain capital goods and invest in other more profitable assets.

Alternatively a company may have to divest unwillingly if it needs cash to sustain operations.

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RELATED FAQS
  1. What are some of the more common reasons divestiture occurs?

    Learn about common reasons why companies choose to conduct divestitures of their assets, and review relevant examples for ... Read Answer >>
  2. How can a divestiture help a company?

    Learn how a divestiture is beneficial to a company by bringing funds and a better focus on core operations, closures of weak ... Read Answer >>
  3. What are the tax implications for both the company and investors in a divestiture ...

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  4. How should a company budget for capital expenditures?

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  5. What is the difference between capital investment decision and current asset decision?

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