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In finance, a disposition refers to the act of selling or otherwise ‘disposing of’ an asset or security. The term can also refer to a transfer of ownership, such as when property is given to someone else through an inheritance. It’s commonly used in the context of real estate transactions, investment portfolios, and capital gains taxation.


The phonetic pronunciation of the word “Disposition” is /ˌdɪspəˈzɪʃən/.

Key Takeaways

  1. Personal Attribute: Disposition is essentially a person’s inherent qualities of mind and character. It is a personal trait that dictates how we behave, think, act, and interact with others.
  2. Influences Decision-Making: Our disposition often determines our outlook on life, and in turn, influences our decision-making process. For example, an individual with a positive disposition is more likely to embrace opportunities and confront challenges with optimism.
  3. Changeability: Even though dispositions are typically deep-seated, they are not entirely fixed. They can change overtime due to factors such as life experiences, maturation or through intentional efforts for personal development. Thus, it is important to recognize and understand our disposition in order to grow.


In the fields of business and finance, the term ‘Disposition’ is fundamental as it refers to the act of getting rid of an asset or security through a direct sale, assignment, or other transfer method. It is a crucial concept as it directly impacts a company’s balance sheet, as the disposition of assets can lead to gains or losses, depending on the difference between the disposal price and the asset’s initial purchase price. Monitoring and correctly managing dispositions can assist in strategizing financial and investment plans, understanding asset performance, optimizing asset utilization, and minimizing taxes. Therefore, it plays a vital role in the overall financial management and business success of a company.


Disposition, in the realm of finance and business, is an essential concept that allows for the management, sale, or other means of disposal of assets. It is primarily involved with the action of getting rid of an asset through direct sales, exchanging, retirement, or destruction. The purpose is to facilitate the freeing up of resources, cessation of expense regarding the asset, or to receive capital from the exchange or sale of the asset. Disposition can apply to a variety of assets, be it tangible like property and equipment, or intangible assets like patents and trademarks. The process of asset disposition serves a crucial role in maintaining a company’s financial health and efficiency. Besides generating revenue from asset sales, proper disposition strategies can reduce storage and maintenance costs associated with non-performing or obsolete assets. Additionally, business disposition is also useful in the context of merger and acquisition transactions, where one company may dispose of unnecessary or overlapping assets from the acquired entity. It may also occur when a company might be restructuring its operations, or needs to discontinue certain product or service lines. Therefore, understanding disposition can be key to effective financial management and operation planning in a business setting.


1. Selling a Property: One common example of disposition in the real world revolves around real estate. If you own a house and decide to sell it, you are disposing of that asset. The disposition would involve the process of listing the property, finding a buyer, and completing the sale transaction. 2. Stock Sale: Another example could involve financial investments like stocks or mutual funds. If an investor decides to sell off a portion or all of their stocks in a certain company, that is a disposition of assets. The investor would coordinate with their broker to ensure the stocks are sold and transferred correctly. 3. Business Asset Sale: The term can also apply to a business looking to remove or replace its assets. For instance, if a company decides to dispose of outdated machinery, it will sell or scrap these machines and usually replace them with newer versions. This process is a disposition of the old assets.

Frequently Asked Questions(FAQ)

What does the term Disposition mean in Finance and Business?
Disposition refers to the action of selling or otherwise disposing of an asset. It can be the sale of securities, property, or any other investment.
What happens during asset disposition?
During asset disposition, an individual, company, or investment fund will sell, donate, or exchange their assets. This process is guided by a structured plan in order to minimize loss and maximize profit.
Can the term Disposition refer to property as well as financial assets?
Yes. A Disposition can refer to the process of selling, donating, or exchanging any type of asset, including both physical properties and financial assets such as stocks or bonds.
How does a disposition affect a company’s balance sheet?
When a company disposes of an asset, it impacts the balance sheet by reducing the value of the company’s assets. If the disposal results in profit, that would be recorded as a gain; if it results in a loss, it is recorded as such.
How does asset disposition factor into capital gains or losses?
When an asset is disposed of, it may be for more or less than the original purchase price. If it’s sold for more, it results in a capital gain. If sold for less, it leads to a capital loss.
Do dispositions include non-physical assets?
Yes, disposition can apply to both physical assets such as property, vehicles, and equipment, as well as non-physical assets such as stocks, bonds, patents, or digital properties.
Is market value considered in dispositions?
Yes, generally the fair market value (the price it would fetch in a well-informed, arm’s length transaction) of an asset is taken into account when considering dispositions.
What happens when assets are disposed of in a business setting?
When a business disposes of its assets, it can mean the company is downsizing, changing direction, or updating its inventory or resources. Whatever the reason, the result of the disposition must be reported for accounting and tax purposes.
Is a disposition a taxable event?
Yes, dispositions can carry tax implications. Depending on the nature of the asset and the profit or loss realized from the disposal, you may face tax consequences.

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