Finance: What is a subsidiary?

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Transcript

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a company that has a parent company which means it's

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owned and controlled by another company Pet TV Corporation comprises

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18 different divisions each of whom operate one form or

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another of TV For pets There's Kat TV which runs

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channels from the Tim Miao channel to the more 50

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shades flavored Scratching Hiss There's also dog TV with books

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and squirrel channels and bunny TV with Meadow and will

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of course Fox Channels Yes it's the other Fox channel

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with no actual foxes Well each of these divisions has

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operated separately a subsidiary companies for accounting and operating efficiency

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reasons At the end of the reporting period all of

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the results are rolled up into one Final number is

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reported by the parent company Pet TV Well the 18

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subsidiaries all comprised value inside of the parent They'll get

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kind of rolled up to give investors one number parent

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and child Cos Air all around you even if you

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didn't know it In real life big names like Alphabet

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a Google and Amazon are actually parent companies of a

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whole bunch of subsidiaries Amazon owns audible all the way

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down through Zappos alphabet which used to be Google Is

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the parent company with yes 26 different subsidiaries Very clever

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Good luck with your taxes there this year Alphabet They've

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got Calico an RD company fighting the Grim Reaper and

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aging You've got capital G a venture capital for start

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ups You know who have their craft together Google of

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course That search engine thing with all the ads that

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you use on the rag there in some And then

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there's loon bringing the Internet to the boonies Yeah well

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why Air subsidiaries Even thing Well it always comes down

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to money doesn't it Subsidiaries can be smarter for for

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some accounting reasons but the main benefit is this separate

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assets so that each subsidiary company has its own managed

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branch of risk That way if Calico the anti ageing

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research and development subsidiary of Alphabet gotten trouble down the

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road for having some cryogenically frozen head wake up early

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and sue them Then Calico would be sued and take

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on the liability alphabets Other subsidiaries like Google Capital G

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and Loon would continue to function as if everything else

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was fine Just fine probably And lawyers would of course

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who all of alphabet but subsidiary Usually there's a legal

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protection built in there So sure if that disembodied heads

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suit alphabet parent company well that would put all the

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subsidiaries in potential jeopardy which is a risk in itself

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Still it's easier to have all the finances separate so

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the parent company can see and choose what assets are

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paying for what liabilities right Well subsidiaries also make more

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sense for some industries like in real estate it can

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be easier to create a new subsidiary for a new

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batch of properties than incorporating all of them into one

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existing company like think of the funnest real estate company

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on the planet Disneyland Writer At least Disney Disney Cos

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you have Disneyland That's one piece realistic then Disney World

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Then he have like Disney China which is a joint

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venture and Disney Europe which is a different joint venture

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there all subsidiaries of the Disney Corporation So keeping those

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liabilities separate in case while that new batch properties is

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actually sitting on some slippery limestone which would cause some

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well pisa situations you know if you know we mean

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so that would be bad and you keep in separate

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Teo keep liability separate and keep track of things separately

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And if well the manager of Disney World's doing a

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much better job than the manager of Disney Land while

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they should be compensated for it or least taking care

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of better right So while taxes and accounting can't be

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more complicated with subsidiaries there's benefits to like offsetting the

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losses of one subsidiary with the profits of another one

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Just a hedge out Taxes III So you don't owe

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any and just you know parent companies or sometimes called

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holding companies and subsidiaries or sometimes called divisions or branches

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Yeah and some people call 50 shades of grey Good 00:03:57.618 --> [endTime] book Some people just saying Oh yeah