A joint venture can add significant potential liabilities to the parent company that are not on the face of the balance sheet.

Question

Quizplus · Accepted Answer

A joint venture is a business arrangement where two or more parties come together temporarily to achieve a specific goal or project. However, because a joint venture is a separate legal entity, the parent companies can be held liable for the actions and debts of the joint venture. These potential liabilities may not be reflected on the parent company's balance sheet but can still impact their financial health and reputation.

A Joint Venture Can Add Significant Potential Liabilities to the Parent