Chapter 10
Considering Consolidated Financial Statements
IN THIS CHAPTER
Understanding consolidation
Seeing how companies buy companies
Exploring consolidated financial statements
Turning to the notes for details
Like couples who marry and work to combine two incomes, two sets of financial obligations, and two ways of managing money, situations get complicated when companies decide to join forces or buy other companies and combine their financial statements. This new arrangement can make it much harder for you to find out how each piece of this new entity performs financially. In this chapter, I discuss how to read the more complex financial reports that arise when companies consolidate.
Getting a Grip on Consolidation
One of the ways businesses grow is buying or merging with other companies. When one company buys another, it gobbles up the new one, which loses its identity. But when firms decide to merge, they usually decide jointly how the new company will operate and how to present the financial statements.
Major corporations that own more than 50 percent of a company create ...
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