Answer Posted / chandu
Definition
A reduction in capital investment.
1. 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.
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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