Financial Terms / minority interest

Understanding Minority Interests

Minority interest is an important factor to consider in a parent company's balance sheet, as it can tell us how much of a controlling interest the parent company has in its subsidiary, ranging from 50% to 100%.

What is a controlling interest?

A controlling interest is when a parent company owns 50% to 100% of a subsidiary.

What does minority interest mean?

Minority interest is a term used to describe the ownership of a company by someone other than the parent company.

How is minority interest calculated?

Minority interest is calculated by subtracting the parent company's ownership stake from 100%. For example, if the parent company owns 75% of the subsidiary, then the minority interest would be 25%. This can be expressed as a formula: Minority Interest = 100% - Parent Company's Ownership Stake

Key Points

Parent Company has Controlling Interest
When a parent company owns at least 50% of a subsidiary, it has a controlling interest in that subsidiary. This means that the parent company has the power to make decisions regarding the subsidiary's operations and finances.
Financial Results Consolidated
The parent company consolidates the financial results of the subsidiary into its own reports. This means that the parent company will include the financial results of the subsidiary into its own financial reports. This allows for a more accurate picture of the parent company's financials.

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