Month End Glossary

Parent Company

A parent company is a firm or corporation that owns enough voting stock in another company to exercise control over its operations and management.

A parent company is a business entity that controls another business entity, referred to as a subsidiary, by owning a majority of its voting stock, typically 50% or more. By holding such a significant ownership stake, the parent company has the right to make key decisions regarding the subsidiary’s operations and policies. Parent companies may own multiple subsidiaries, forming a corporate group that works together for economic purposes, such as diversifying business operations or entering new markets. \n\nIn the context of financial reporting, a parent company must consolidate the financial statements of its subsidiaries, providing an aggregated view of the financials of the entire corporate group. For example, if Company A owns 75% of Company B, Company A is the parent company, and it will consolidate the financials of Company B in its reports. This consolidation is guided by international accounting standards like IFRS. \n\nAn example sentence is: 'The parent company decided to expand its operations through its subsidiary in the European market.'

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