A parent company chooses to acquire only a 65% interest in its subsidiary. Which of the following is not a reason why the parent would choose to acquire less than a 100% interest in a subsidiary?
A)Reduction of ownership risk
B)Potential for increased share dilution
C)Maintenance of a market for the subsidiary's shares
D)Potential links to government support and management expertise through the NCI

Question

Quizplus · Accepted Answer

Choosing to acquire less than a 100% interest in a subsidiary can provide benefits such as reduction of ownership risk (A), maintenance of a market for the subsidiary's shares (C), and potential links to government support and management expertise through the Non-Controlling Interest (NCI) (D). However, potential for increased share dilution (B) is not a reason why a parent company would choose to acquire less than a 100% interest in its subsidiary. In fact, acquiring a larger percentage would reduce the potential for increased share dilution.

A Parent Company Chooses to Acquire Only a 65% Interest