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Minority report

Profit numbers may appear much higher than their true value when minority interest is not considered. You may be counting eggs that aren't yours

Minority report

A subsidiary is a company owned by a 'parent' company. The parent may own all the shares in the subsidiary, but there are cases where it doesn't hold 100 per cent shares in the subsidiary. The stake which the parent does not own is called minority interest. Minority interest comprises less than 50 per cent stake or voting rights in a subsidiary.

Company regulations make it necessary for the parent to report its consolidated statement, wherein it also includes the financials of its subsidiaries. The consolidated net-profit figure may also have some portion which belongs to minority shareholders (those who own the minority interest). This is why a separate entry for net profit is given in the consolidated profit-and-loss statement after adjusting for the minority interest. It is important to analyse the consolidated profit obtained after adjusting for minority interest as it is the 'real' profit.

There are many companies where net-profit figures can be misleading as the portion of minority interest can be substantial and the profit actually belonging to the holding company is very low. The following table lists some companies where minority interest as per cent of net profit is very high.