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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » who are the minority share holders & equity holders?

who are the minority share holders & equity holders?

4 posters

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Carolis


Manager - Equity Analytics
Manager - Equity Analytics

Why companies need to pay from their profits to equity holders? Is this different to dividends?
I thought all the small investors of a company are minority share holders. It does not look like that. Please help. Thanks

nkalansu


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Hi there. Hope i can give you some idea about minority shareholders.

Say Company X owns 70% of Company Y. So X is the parent or the holding company of Y.
Since 70% of company Y is owned by X, balance 30% of Y which is not owned by X is known as minority shareholders in the view point of Holding company X.

Say Company Y posts a profit after tax of Rs. 1,000 M. So the shareholders of company X can claim 70% of the profits of Company Y which is Rs. 700M. Balance Rs. 300 M is the profit available to the remaining 30% shareholders of company Y who are not part of the Parent company X. So when the company X prepare consolidated accounts it takes total profit of Rs. 1,000 M and shows Rs. 700 M as attributable to the shareholders of parent company and Rs. 300 M as the profit attributable to the Minority shareholders.

When Company Y declare dividends 70% of that dividend goes to parent. This amount is eliminated as inter company transactions within the group when preparation of consolidated accounts. So effectively 30% of the total dividend declared by Y goes outside the group as payment of dividends to minority shareholders.

Your question is something to do with the preparation of consolidated accounts for a holding company that has subsidiaries and associates and joint ventures and etc etc...... So if you do not have an accounting background better visit some useful websites that give basic idea of preparation of consolidated accounts.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

nkalansu wrote:Hi there. Hope i can give you some idea about minority shareholders.

Say Company X owns 70% of Company Y. So X is the parent or the holding company of Y.
Since 70% of company Y is owned by X, balance 30% of Y which is not owned by X is known as minority shareholders in the view point of Holding company X.

Say Company Y posts a profit after tax of Rs. 1,000 M. So the shareholders of company X can claim 70% of the profits of Company Y which is Rs. 700M. Balance Rs. 300 M is the profit available to the remaining 30% shareholders of company Y who are not part of the Parent company X. So when the company X prepare consolidated accounts it takes total profit of Rs. 1,000 M and shows Rs. 700 M as attributable to the shareholders of parent company and Rs. 300 M as the profit attributable to the Minority shareholders.

When Company Y declare dividends 70% of that dividend goes to parent. This amount is eliminated as inter company transactions within the group when preparation of consolidated accounts. So effectively 30% of the total dividend declared by Y goes outside the group as payment of dividends to minority shareholders.

Your question is something to do with the preparation of consolidated accounts for a holding company that has subsidiaries and associates and joint ventures and etc etc...... So if you do not have an accounting background better visit some useful websites that give basic idea of preparation of consolidated accounts.

Well explained.

anuradhakandy


Equity Analytic
Equity Analytic

crystal clear

Carolis


Manager - Equity Analytics
Manager - Equity Analytics

Thanks a lot nkalansu

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