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Finance: What is a subsidiary? 1 Views
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Transcript
- 00:00
and finance Allah shmoop What is a subsidiary All right
- 00:07
people What is a subsidiary Is there like a Domus
- 00:10
City Eri Just like a 50 shades thing Maybe not
- 00:13
Well they're both complicated and have to do with control
- 00:17
But no put those fuzzy handcuffs away A subsidiary is
Full Transcript
- 00:20
a company that has a parent company which means it's
- 00:23
owned and controlled by another company Pet TV Corporation comprises
- 00:19
18 different divisions each of whom operate one form or
- 00:31
another of TV For pets There's Kat TV which runs
- 00:35
channels from the Tim Miao channel to the more 50
- 00:39
shades flavored Scratching Hiss There's also dog TV with books
- 00:43
and squirrel channels and bunny TV with Meadow and will
- 00:47
of course Fox Channels Yes it's the other Fox channel
- 00:50
with no actual foxes Well each of these divisions has
- 00:53
operated separately a subsidiary companies for accounting and operating efficiency
- 00:57
reasons At the end of the reporting period all of
- 00:59
the results are rolled up into one Final number is
- 01:02
reported by the parent company Pet TV Well the 18
- 01:05
subsidiaries all comprised value inside of the parent They'll get
- 01:09
kind of rolled up to give investors one number parent
- 01:12
and child Cos Air all around you even if you
- 01:14
didn't know it In real life big names like Alphabet
- 01:17
a Google and Amazon are actually parent companies of a
- 01:22
whole bunch of subsidiaries Amazon owns audible all the way
- 01:25
down through Zappos alphabet which used to be Google Is
- 01:28
the parent company with yes 26 different subsidiaries Very clever
- 01:33
Good luck with your taxes there this year Alphabet They've
- 01:35
got Calico an RD company fighting the Grim Reaper and
- 01:39
aging You've got capital G a venture capital for start
- 01:42
ups You know who have their craft together Google of
- 01:45
course That search engine thing with all the ads that
- 01:48
you use on the rag there in some And then
- 01:50
there's loon bringing the Internet to the boonies Yeah well
- 01:54
why Air subsidiaries Even thing Well it always comes down
- 01:57
to money doesn't it Subsidiaries can be smarter for for
- 02:00
some accounting reasons but the main benefit is this separate
- 02:02
assets so that each subsidiary company has its own managed
- 02:06
branch of risk That way if Calico the anti ageing
- 02:10
research and development subsidiary of Alphabet gotten trouble down the
- 02:14
road for having some cryogenically frozen head wake up early
- 02:17
and sue them Then Calico would be sued and take
- 02:20
on the liability alphabets Other subsidiaries like Google Capital G
- 02:23
and Loon would continue to function as if everything else
- 02:26
was fine Just fine probably And lawyers would of course
- 02:30
who all of alphabet but subsidiary Usually there's a legal
- 02:33
protection built in there So sure if that disembodied heads
- 02:36
suit alphabet parent company well that would put all the
- 02:38
subsidiaries in potential jeopardy which is a risk in itself
- 02:41
Still it's easier to have all the finances separate so
- 02:43
the parent company can see and choose what assets are
- 02:46
paying for what liabilities right Well subsidiaries also make more
- 02:49
sense for some industries like in real estate it can
- 02:52
be easier to create a new subsidiary for a new
- 02:54
batch of properties than incorporating all of them into one
- 02:57
existing company like think of the funnest real estate company
- 03:01
on the planet Disneyland Writer At least Disney Disney Cos
- 03:04
you have Disneyland That's one piece realistic then Disney World
- 03:07
Then he have like Disney China which is a joint
- 03:09
venture and Disney Europe which is a different joint venture
- 03:12
there all subsidiaries of the Disney Corporation So keeping those
- 03:15
liabilities separate in case while that new batch properties is
- 03:18
actually sitting on some slippery limestone which would cause some
- 03:22
well pisa situations you know if you know we mean
- 03:25
so that would be bad and you keep in separate
- 03:27
Teo keep liability separate and keep track of things separately
- 03:30
And if well the manager of Disney World's doing a
- 03:32
much better job than the manager of Disney Land while
- 03:35
they should be compensated for it or least taking care
- 03:37
of better right So while taxes and accounting can't be
- 03:39
more complicated with subsidiaries there's benefits to like offsetting the
- 03:42
losses of one subsidiary with the profits of another one
- 03:45
Just a hedge out Taxes III So you don't owe
- 03:48
any and just you know parent companies or sometimes called
- 03:50
holding companies and subsidiaries or sometimes called divisions or branches
- 03:55
Yeah and some people call 50 shades of grey Good 00:03:57.618 --> [endTime] book Some people just saying Oh yeah
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