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Glossary

Minority Interest

Financial Term

Minority Interest, also known as Non-Controlling Interest (NCI), refers to the ownership interest in a subsidiary company that is not owned by the parent company or the majority shareholder. In other words, it represents the ownership of a fraction of a subsidiary company by a third-party investor.

In the financial industry, minority interest is used to measure the proportion of the subsidiary company*s net assets that are held by the third-party investor. This figure is reported on the balance sheet of the parent company as a liability, indicating that the minority interest holder has a claim on a percentage of the subsidiary*s assets and earnings.

The calculation of minority interest is based on the percentage of ownership held by the third-party investor, as well as the subsidiary*s net assets. For example, if a parent company owns 80% of a subsidiary and a third-party investor owns 20%, the parent company will report 80% of the subsidiary*s net assets on its balance sheet, while the minority interest holder will report 20% of the net assets.

Minority interest is important in financial analysis as it allows investors and analysts to understand the level of control and influence that the parent company has on the subsidiary*s operations. It also provides an indication of the potential risks and benefits associated with the subsidiary*s operations for the third-party investor.

Overall, minority interest is a key concept in the financial industry that helps in understanding the ownership structure of a subsidiary company, and its impact on the parent company*s financial statements.




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