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Finance GlossaryCapital Gains
Capital Gains
Definition of Capital Gains
A capital gain is a profit an investor or trader earns by selling shares, commodities, futures, options, currencies, and other assets. More literally, a profit is a gain on the capital that’s invested - hence the term capital gains.
Say someone buys a share for Rs. 1000 and sells it for Rs. 1100. The capital gains will be Rs. 100 in this case. The taxation of capital gains varies based on the asset type and the duration after which it was sold.
Say someone buys a share for Rs. 1000 and sells it for Rs. 1100. The capital gains will be Rs. 100 in this case. The taxation of capital gains varies based on the asset type and the duration after which it was sold.
Related Terms
Identifiable Asset
An identifiable asset is a tangible or intangible asset that be assigned a fair value at any point in time. This concept is important during acquisitions and mergers as not all assets on a company’s balance sheet can easily be valued.
Simple examlpeps of identifiable assets include machinery. You can easily identify machinery as a separate entity and assign it a value based on various factors.
Simple examlpeps of identifiable assets include machinery. You can easily identify machinery as a separate entity and assign it a value based on various factors.
Information Ratio
Information Ratio (IR) compares the returns generated by an asset adjusted for risk compared to a benchmark. IR helps you identify the level of consistency with which a fund or fund manager performs over time. This can help you compare fund managers who follow a similar investment strategy.
Unrealized Gain
An unrealized gain refers to the increase in value of an investment that has not yet been sold. For instance, if an investor buys shares at ₹500 and their current market price rises to ₹650, the ₹150 increase is an unrealized gain until the shares are actually sold.
Long-Term Stocks
Long-term stocks are shares of companies that investors hold for three years or more with the intention of getting lucrative returns combined with solid future prospects. Long-term stocks are typically chosen based on fundamental analysis, including factors such as the company's financial health, growth potential, competitive advantage, and industry trends.
Forex Options
Forex options are exchange-traded derivative contracts that give the right but not the obligation to buy or sell a pair of underlying currencies at a pre-agreed price and date. Forex options are also known as currency options.
Every forex option can be split into a call or put option. A forex call option gives the holder the right to buy underlying forex pairs while a forex put option gives the holder the right to sell underlying currency pairs.
In either case, there is no obligation to exercise the contract but there is a pre-agreed price and expiration date attached. In India, forex options are only available for the USD-INR currency pair.
Every forex option can be split into a call or put option. A forex call option gives the holder the right to buy underlying forex pairs while a forex put option gives the holder the right to sell underlying currency pairs.
In either case, there is no obligation to exercise the contract but there is a pre-agreed price and expiration date attached. In India, forex options are only available for the USD-INR currency pair.
Net Profit Margin
Net Profit Margin shows the portion of revenue that remains as profit once all operating costs, interest, and taxes have been deducted. It is expressed as a percentage and helps investors understand a company’s overall profitability and cost efficiency.
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