Gain or Loss on Sale of Assets
What does it mean
Gain or Loss on Sale of Assets is an item on a borrower's Income Statement. When a business sells a Noncurrent Asset, like used equipment, any sale proceeds exceeding the current Book Value of the equipment result in a Gain on Sale of Assets. Conversely, if the sale amount is less than the current book value, it incurs a Loss on Sale of Assets.
Why does it matter
The reason the sale shows up as a Gain or Loss on Sale of Asset rather than Revenue is because the borrower is selling something that is not part of its normal business activities. This is an important attribute to note because ultimately as a banker we are trying to identify their Stable, Recurring and Likely to Continue income to gauge their ability to repay our loans. Due to the Gain/Loss on Sale of Assets being different than their normal, typically any value here is removed from the EBITDA calculation.
Other Relevant Terms
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