Think of an associate company as not quite a subsidiary.
If one company owns another company outright, then the smaller firm is a subsidiary of the bigger one. But there are times when a larger company owns only a smallish stake in a smaller one, but not a majority of the shares. It has a sizable interest, possibly seats on the board and a heavy influence on management, but less than 50% of the voting stock. In this scenario, the smaller firm is an associate company.
The distinction has some impact on the accounting for the larger company. Even though it owns a notable stake in the smaller company, the smaller firm's holdings don't get rolled into the holdings for the larger company for accounting purposes, as would happen with a straight-up subsidiary. Instead, the holdings are viewed like an investment. The larger company holds shares in the smaller company as an asset, but doesn't hold the smaller company's assets directly.
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Finance: What is Common Stock?379 Views
Finance a la shmoop what is common stock well, common stock
simply put is ownership common stock ownership is a foundation of what [Businesssmen and women in a meeting fighting for control]
comprises control in a corporation it's the common stock that elects the board
of directors who then hires the CEO who then you know hires everyone else so [The organizational chart of a corporation]
yeah when someone owns a share they own a teeny tiny piece of a company the more
shares they own well the more of a voice they have in the management of that [Company building crumbles to the floor]
company so someone who has 51% of the shares in a company will actually have a
lot to say in the election of a Board of Directors for example where someone with [Member of the board with 51% shouting orders at other members]
the small percentage of shares still has a voice but it's a small squeaky one in
a bankruptcy situation common stock sits at the very bottom of the stack of
priorities in being paid back a company that's going bankrupt will start by [Examples of priority stack with IRS obligations first]
paying any IRS obligations, yeah the IRS always wins then they'll pay
employees their salaries and they'll pay any vendors who are owed money then
they'll pay off bank loans and they'll pay back preferred stock and finally at
the very bottom there if there are a few nickels and dimes left over they'll pay [Man emptying nickels and dimes from jean pocket]
common stockholders back but shares you hear quoted from Apple and Amazon and
bathmats are us are all just common stock being traded on NASDAQ or the New [Apple, Amazon and Bathmats R Us stock prices displayed on NASDAQ screens]
York Stock Exchange or other places which are owned by millions and millions
of common and uncommon people [A strange person wearing shoes for gloves in a busy office]
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