In: Accounting
Discuss the factors you would consider when deciding whether an investor has significant influence rather than control of an entity.
Before answering the question i need to clarify you who is an investor.
Investor:- Investor is a person who provides capital to several companies, who are in seek to raise funds from public. And he expects something in return whether financial return or to gain any advantage.
Types of investments:-
1.Equity
2.Debentures
3.Preference shares
4.Commodities
5.Derivaties
Factors considering whether an investor has significant influence rather than control of an entity:-
If an investor is holding 20% or more stake in the company then he/she is considered to be having significant influence in the company.
Significant influence refers to power of participation in all financial related matters and operational related matters. They have only right to participate in above said financial and operational activities but they do not have the right to control them.
If an investor is holding 51% or more stake in the company then the investor is to be considered to be having control of an entity.