B4002 - Chapter 08

Consolidated Cash Flow Statement

A financial statement that combines the cash flow information of a parent company and its subsidiary, excluding intercompany transactions.

Non-controlling Interest (NCI)

The portion of a subsidiary's equity that is not owned by the parent company.

Indirect Method

A method of presenting cash flows from operations in which net income is adjusted for non-cash items, changes in working capital, and gains/losses from investing and financing activities.

Depreciation

The systematic allocation of the cost of an asset over its useful life.

Amortization

The systematic allocation of the cost of an intangible asset over its useful life.

Acquisition Differential

The difference between the cost of acquiring a subsidiary and the fair value of its identifiable net assets.

Equity Method of Accounting

A method of accounting for investments in subsidiaries where the investor recognizes its share of the subsidiary's net income and adjusts the investment account accordingly.

Block Acquisition

The first increase in ownership of a subsidiary that results in significant influence, triggering the use of the equity method of accounting.

Control

The ability of a parent company to govern the financial and operating policies of a subsidiary.

Dilution

The decrease in a parent company's percentage ownership of a subsidiary due to the issuance of additional shares by the subsidiary.

Preferred Shares

Shares of stock that have preferential rights and preferences over common shares, such as priority in dividend payments and liquidation proceeds.

Cumulative Dividend Rights

The right of preferred shareholders to receive dividends in arrears before common shareholders receive any dividends.

Redemption Premium

The amount paid by a company to redeem its preferred shares at a price higher than their original cost.

Consolidated Net Income

The net income of a consolidated entity, which includes the parent company and its subsidiaries.

Debt-to-Equity Ratio

A financial ratio that compares a company's total debt to its total equity, indicating the proportion of debt financing relative to equity financing.