Question

In: Accounting

what advantages does a company achieve when it possesses significant influence owe another company through voting...

what advantages does a company achieve when it possesses significant influence owe another company through voting stock ownership?

Solutions

Expert Solution

Controlling interest means having share holding of greater than 50 percent in a company.

Advantages of having a controlling stake in a company:

1)A company who have the majority control in the company have the sweeping power to veto or to overturn the decisions which the existing board members made as they command the majority of the votes of the company. It also gives ownership of operational and strategic decision-making processes.

2)When there is a majority interest in any company, then it gives guaranteed membership in the board of directors of the company. It is quite common for the person having the controlling interest to become chairman of the board of directors of the company.

3)When the company is generating the profits, then the controlling shareholders enjoy the largest rewards share. Such rewards include dividends, retained earnings, share splits, or any of the proceeds which are received by selling the company to the other entity.

4)When there are the controlling shareholders in the company, the management of the company works with more efficiency and effectiveness as controlling shareholders always keeps check on the management and block any mismanagement, which could affect their investments negatively in the company.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Investments are reported at fair value when a company has a significant influence over another company...
Investments are reported at fair value when a company has a significant influence over another company in which it invests. True False Consolidated financial statements combine the separate financial statements of the purchasing company and the acquired company into a single set of financial statements. True False When the investor has insignificant influence, the receipt of cash dividends is recorded as dividend revenue. True False When significant influence exists, the investment should be accounted for by the equity method. True...
When significant influence does exist, the equity method of accounting must be used. Explain how the...
When significant influence does exist, the equity method of accounting must be used. Explain how the fair market method and the equity method of accounting for equity securities differ.
What does it mean when an acquisition is unable to achieve synergy? a. When a firm...
What does it mean when an acquisition is unable to achieve synergy? a. When a firm finds itself in extraordinary debt as the result of acquiring another firm b. When the acquiring firm and acquired firm do not effectively share resources, economies of scale, and economies of scope across the businesses c. When a firm has too many business units and no clear method of measuring their performance d. When a firm becomes so large it does not have the...
Leadership is the ability to influence followers to achieve common goals through shared purposes. Leaders, with...
Leadership is the ability to influence followers to achieve common goals through shared purposes. Leaders, with the help of followers, are responsible for enacting an organization’s vision, mission and strategies, and for achieving goals in socially responsible ways. Research amazon leadership and management, as well as their strategies and structure in meeting stakeholder needs. Explain, based on your research, how the company is a “firm of endearment.”
What advantages does a business have by going through the budget process?
What advantages does a business have by going through the budget process?
what does it mean when an independent variable is significant? in Stats
what does it mean when an independent variable is significant? in Stats
What does it mean to achieve effective delivery through the voice and body? How can you...
What does it mean to achieve effective delivery through the voice and body? How can you put this into practice when conducting a speech? Secondly, why is extemporaneous speaking mentioned in our class
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value...
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 6 percent bonds payable with a $14.0 million face value (maturing in 20 years) on the open market at a premium of $1,070,000. On January 1, 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of...
Pesto Company possesses 80% of Salerno Company's outstanding voting stock. Pesto uses the intial value method...
Pesto Company possesses 80% of Salerno Company's outstanding voting stock. Pesto uses the intial value method to account for this investment. On January 1, 2014, Pesto sold 9% bonds payable with a $10 million face value (maturing in 20 years) on the open market at a premium of $600,000. On January 1, 2017, Salerno acquired 40% of these same bondsfrom an outside party at 96.6% of fave value. Both companies use the straigh-line method of amortization. For a 2018 consolidation,...
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value...
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 10 percent bonds payable with a $18.0 million face value (maturing in 20 years) on the open market at a premium of $760,000. On January 1, 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT