Which of the following is not a reason for an entity to prefer to have less than 100% ownership interest in a subsidiary?

A) To comply with regulatory requirements.
B) To receive the whole gain on acquisition.
C) To decrease the cash necessary to acquire the control over the subsidiaries.
D) To incentivise the subsidiary's executives by allowing them to hold a non-controlling interest.

Question

Peyton Moldenhauer · Accepted Answer

Final Answer : B, Explanation :  If the entity has less than 100% ownership interest, they will not receive the whole gain on acquisition. However, having less than 100% ownership interest may be preferred to comply with regulatory requirements (such as avoiding antitrust issues), decrease the cash necessary for acquisition, or incentivize subsidiary executives.

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