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Meaning / Definition of

Capital Net Worth

Categories: Accounting,

total assets minus total liabilities of an individual or company. For a public company, the excess of assets over liabilities consist of retained earnings, common stock and additional paid-in surplus; here also called owner's equity or shareholders' equity or net assets. For an individual, the excess of assets over liabilities is most likely to come from savings and any additional contributions to income that they have received. Some economists say net worth is not very useful, since financial statements value most assets and liabilities at historical cost, which is usually not a good indicator of true value. also called capital net worth.

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Definition / Meaning of

Direct Investment

Categories: Stocks,

You can make a direct investment in a company's stock through dividend reinvestment plans (DRIPs) and direct purchase plans (DPPs). If a company in which you own stock offers a DRIP, you have the opportunity to re-invest cash dividends and capital gains distributions in more stock automatically each time they are paid. In the case of DPPs, also known as direct stock purchase plans (DSPs), companies can sell their stock directly to investors without using a brokerage firm as intermediary.Direct investment also refers to long-term investments in limited partnerships that invest in real estate, leased equipment, and energy exploration and development. In this type of investment, you become part owner of the hard assets of the enterprise.You realize income from your investment by receiving a portion of the business's profits, for example, from rents, contractual leasing payments, or oil sales. In some cases you realize capital gains at the end of the investment term, if the business sells its assets.These DPPs are largely nontraded and have no formal secondary markets. This means you will often have to hold the investment for terms of eight years or more, with no guarantee that any of the income or capital gains will materialize. Many people make direct investments because there can be significant tax benefits, such as tax deferral and tax abatement, depending on the investment.

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