In order to analyse a company’s financial statement in fundamental analysis, you will find these terms again and again. Therefore, these basic financial terms should be clear to us. One thing is quite obvious that standalone and consolidated is different from one another. So, at the end of the content, ‘standalone vs consolidated’ the concept will be clear.
Standalone vs Consolidated Financial Statement
If standalone is connected with any ratio or profit, it means that profit or ratio is associated with the parent company only. Standalone data based on single segment or division within a firm.
Then the question is why consolidated calculation is needed when we can read a company’s standalone result only for analysis. If a company have numerous subsidiaries then consolidated financial statement is needed. Hence, consolidated results take into account the performance of subsidiaries of a company.
Let’s take an example, suppose a company is XYZ and its subsidiary is XY. Both the companies have their separate legal entity. Therefore, as per the law, both XYZ and XY can prepare their own financial statement separately. However, XY is the subsidiary of XYZ, it expresses XYZ can control the operating and financial decision of XY. So, XYZ in addition to preparing its own financial statement will also prepare a consolidated financial statement of XYZ and XY as a group.
One of the main advantages of getting both financial statements based on standalone and consolidated is investors can find out the health of not only the parent company’s but also its subsidiaries.
However, analysing consolidated calculation is not as easy as analysing standalone. As consolidated calculation requires lots of information, data in compare to standalone.
The data shows standalone and consolidated result separately from each company listed above. As we have mentioned above standalone is based on parent company’s data while consolidated result includes all the subsidiary company’s aggregate data.
Hence. in case of analysing a company’s data accurately, both standalone and consolidate result are important. Investors can get an aggregate overview of the company’s growth, profitability, debt amount from it.
Categories: Stock Market Basics