Asked by Kennedy McCarthy on Jun 07, 2024
Verified
Parent Ltd owns 20% of S1 Ltd and 80% of S2 Ltd.In addition,S2 Ltd owns 70% of S1 Ltd.The total Parent Ltd interest in S1 Ltd is:
A) 20%
B) 76%
C) 56%
D) none of the above
Total Parent Ltd Interest
The total interest held by the parent company in a subsidiary, including both direct and indirect holdings.
- Gain an understanding of the notion of non-controlling interest (NCI) and the process for determining its value.
- Acquire knowledge on the role of direct and indirect ownership in the governance and amalgamation processes.
Verified Answer
SP
Sapana PoudelJun 09, 2024
Final Answer :
B
Explanation :
To determine the total Parent Ltd interest in S1 Ltd, we need to add the direct and indirect holdings.
Parent Ltd directly owns 20% of S1 Ltd, and S2 Ltd owns 70% of S1 Ltd. Therefore, the indirect holding of Parent Ltd in S1 Ltd through S2 Ltd is:
70% of S1 Ltd x 80% of S2 Ltd = 56% of S1 Ltd
Now we can add the direct and indirect holdings:
20% of S1 Ltd + 56% of S1 Ltd = 76% of S1 Ltd
Therefore, the total Parent Ltd interest in S1 Ltd is 76%. Therefore, the correct answer is option B.
Parent Ltd directly owns 20% of S1 Ltd, and S2 Ltd owns 70% of S1 Ltd. Therefore, the indirect holding of Parent Ltd in S1 Ltd through S2 Ltd is:
70% of S1 Ltd x 80% of S2 Ltd = 56% of S1 Ltd
Now we can add the direct and indirect holdings:
20% of S1 Ltd + 56% of S1 Ltd = 76% of S1 Ltd
Therefore, the total Parent Ltd interest in S1 Ltd is 76%. Therefore, the correct answer is option B.
Learning Objectives
- Gain an understanding of the notion of non-controlling interest (NCI) and the process for determining its value.
- Acquire knowledge on the role of direct and indirect ownership in the governance and amalgamation processes.