Explain Why a Parent Might Want to Own Less Than

question 12

Essay

Explain why a parent might want to own less than 100% of the shares of a subsidiary.

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Definitions:

Direct Expenses

Costs that can be directly traced to the production of specific goods or services.

Investment Turnover

A measure that shows how frequently investment assets are bought and sold within a given period.

Cost Center

A department or unit within an organization that does not directly add to profit but still incurs costs, such as HR or IT department.

Service Departments

Units within a company that provide support services to other departments but do not directly generate revenue.