Non-Controlling Interest
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Non-Controlling Interest
In accounting, minority interest (or non-controlling interest) is the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The magnitude of the minority interest in the subsidiary company is generally less than 50% of outstanding shares, or the corporation would generally cease to be a subsidiary of the parent. It is, however, possible (such as through special voting rights) for a controlling interest requiring consolidation to be achieved without exceeding 50% ownership, depending on the accounting standards being employed. Minority interest belongs to other investors and is reported on the consolidated balance sheet of the owning company to reflect the claim on assets belonging to other, non-controlling shareholders. Also, minority interest is reported on the consolidated income statement as a share of profit belonging to minority shareholders. The reporting of 'minority interest' is a consequence of the requirement by accounting standards to ...
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Accounting
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and " financial reporting" are often used as synonyms. Accounting can be divided into several fields including financial accounting, management accounting, tax accounting and cost accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators and suppliers; and management accounting focuses on the mea ...
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Business Valuation
Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Here various valuation techniques are used by financial market participants to determine the price they are willing to pay or receive to effect a sale of the business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest. Specialized business valuation credentials include the Chartered Business Valuator (CBV) offered by the CBV Institute, ASA and CEIV from the American Society of Appraisers, and the CVA by the National Association of Certi ...
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Financial Capital
Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based, ''e.g.'', retail, corporate, investment banking, etc. In other words, financial capital is internal retained earnings generated by the entity or funds provided by lenders (and investors) to businesses in order to purchase real capital equipment or services for producing new goods and/or services. In contrast, real capital (or economic capital) comprises physical goods that assist in the production of other goods and services, e.g. shovels for gravediggers, sewing machines for tailors, or machinery and tooling for factories. IFRS concepts of capital maintenance ''Financial capital'' generally refers to saved-up financial wealth, especially that use ...
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Corporate Finance
Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value. Correspondingly, corporate finance comprises two main sub-disciplines. Capital budgeting is concerned with the setting of criteria about which value-adding projects should receive investment funding, and whether to finance that investment with equity or debt capital. Working capital management is the management of the company's monetary funds that deal with the short-term operating balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers). The terms corporate finance and corporate financier ar ...
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Voting Interest
Voting interest (or voting power) in business and accounting means the total number, or percent, of votes entitled to be cast on the issue at the time the determination of voting power is made, excluding a vote which is contingent upon the happening of a condition or event which has not occurred at the time. Voting interest is one form of economic interest. Economic interests comprise all types and forms of investment vehicles that an investee could issue or be a party to, including equity securities; financial instruments with characteristics of equity, liabilities, or both; long-term debt and other debt-financing arrangements; leases; and contractual arrangements such as management contracts, service contracts, or intellectual property licenses. Non-voting interest Ownership of more than 50% of voting shares generally gives the right of control and consolidation. In special cases, control is possible without having to own more than 50% of voting stock. For example, if agreed, ...
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Tag-along Right
Tag along rights (TARs) comprise a group of clauses in a contract which together have the effect of allowing the minority shareholder(s) in a corporation to also take part in a sale of shares by the majority shareholder to a third party under the same terms and conditions. Consider an example: A and B are both shareholders in a company, with A being the majority shareholder and B the minority shareholder. C, a third party, offers to buy A's shares at an attractive price, and A accepts. In this situation, tag-along rights would allow B to also participate in the sale under the same terms and conditions as A. As with other contractual provisions, tag-along rights originated from the doctrine of freedom of contract and is governed by contract law (in common law countries) or the law of obligations (in civil law countries). As tag-along rights are contractual terms between private parties, they are often found in venture capital and private equity firms but not public companies. St ...
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Share Capital
A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capital" may also denote the number and types of shares that compose a corporation's share structure. Definition In accounting, the share capital of a corporation is the nominal value of issued shares (that is, the sum of their par values, sometimes indicated on share certificates). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called share premium, additional paid-in capital or paid-in capital in excess of par). Commonly, the share capital is the total of the nominal share capital and the premium share capital. Most jurisdictions do not allow a company to issue shares below par value, but if permitted they are said to be issued at a discount or par ...
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Pre-emption Right
A pre-emption right, right of pre-emption, or first option to buy is a contractual right to acquire certain property newly coming into existence before it can be offered to any other person or entity. It comes from the Latin verb ''emo, emere, emi, emptum'', to buy or purchase, plus the inseparable preposition ''pre'', before. A right to acquire existing property in preference to any other person is usually referred to as a '' right of first refusal''. Company shares In practice, the most common form of pre-emption right is the right of existing shareholders to acquire new shares issued by a company in a rights issue, usually a public offering. In this context, the pre-emptive right is also called subscription right or subscription privilege. It is the right but not the obligation of existing shareholders to buy the new shares before they are offered to the public. In that way, existing shareholders can maintain their proportional ownership of the company and thus prevent stock di ...
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Equity Method
Equity method in accounting is the process of treating investments in associate companies. Equity accounting is usually applied where an investor entity holds 20–50% of the voting stock of the associate company, and therefore has significant influence on the latter's management. Under International Financial Reporting Standards, equity method is also required in accounting for joint ventures. The investor records such investments as an asset on its balance sheet. The investor's proportional share of the associate company's net income increases the investment (and a net loss decreases the investment), and proportional payments of dividends decrease it. In the investor’s income statement Equity accounting may also be appropriate where the investor has a smaller interest, depending on the nature of the actual relationship between the investor and investee. Control of the investee, usually through ownership of more than 50% of voting stock, results in recognition of a subsidiary, w ...
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Drag-along Right
Drag-along right (DAR) is a legal concept in corporate law. Under the concept, if the majority shareholder(s) of an entity sells their stake, the prospective owner(s) have the right to force the remaining minority shareholders to join the deal. However, the owner must usually offer the same terms and conditions to the minority shareholders as to the majority shareholder(s). Drag-along rights are fairly standard terms in a stock purchase agreement. This right protects majority shareholders (allowing them to sell to an owner desiring total control of the entity, without being encumbered by holdout investors) but also protects minority shareholders (who can sell their investment on the same terms and conditions as the majority shareholder). This differs from a tag-along right, which also allows minority shareholders to sell on the same terms and conditions (and requires the new owner to offer them), but does not require them to sell. In most jurisdictions drag-along and tag-along r ...
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Consolidation (business)
In business, consolidation or amalgamation is the merger and acquisition of many smaller companies into a few much larger ones. In the context of financial accounting, ''consolidation'' refers to the aggregation of financial statements of a group company as consolidated financial statements. The taxation term of consolidation refers to the treatment of a group of companies and other entities as one entity for tax purposes. Under the Halsbury's Laws of England, 'amalgamation' is defined as "a blending together of two or more undertakings into one undertaking, the shareholders of each blending company, becoming, substantially, the shareholders of the blended undertakings. There may be amalgamations, either by transfer of two or more undertakings to a new company or the transfer of one or more companies to an existing company". Overview Consolidation is the practice, in business, of legally combining two or more organizations into a single new one. Upon consolidation, the origi ...
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