What Does It Mean to Consolidate?

To consolidate (consolidation) is to combine assets, liabilities, and other financial items of two or more enti�🍸�ties into one.

In the context of financial 澳洲幸运5官方开奖结果体彩网:accounting, the term “consolidate” often refers to the consolidation of 澳洲幸运5官方开奖结果体彩网:financial statements wherein all subsidiaries report under the umbrella of a parent company. Consolidation also refers to the union of smaller companies into larger companies through 澳洲幸运5官方开奖结果体彩网:mergers and acquisitions (M&A).

How Consolidation Works

The term “consolidate” comes from from the Latin consolidatus, which means “to combine into one body.” Whatever the context, to consolidate involves bringing together some larger amount of items into a single, smaller number. For instance, a traveler may consolidate all of their luggage into a single, larger bag. In finance 🐟and accounting, consolid𝐆ation has more specific nuance.

Consolidation in Finance

澳洲幸运5官方开奖结果体彩网:Consolidation involves taking multiple accounts or businesses and combining the information into a single point. In financial accounting, consolidated financial statements provide a comprehensive view of the financial position of both the 澳洲幸运5官方开奖结果体彩网:parent company and its 澳洲幸运5官方开奖结果体彩网:subsidiaries𝓀, rather than one company’s stand-alone position.

In consolidated accounting, the information from a parent company and its subsidiaries is treated as though it comes from a single entity. The cumulative assets from the business, as well as any revenue or expenses, are recorded on the 澳洲幸运5官方开奖结果体彩网:balance sheet of the parent company. This information is also reported on the✱ income statement of the parent company.

Consolidated financial statements are used when the parent company holds a 澳洲幸运5官方开奖结果体彩网:majority stake by controlling more than 50% of the subsidiary business. Parent companies that hold more than 20% qualify to use consolidated accounting. If a parent company holds less than a 20% stake, it must use 澳洲幸运5官方开奖结果体彩网:equity method accounting.

The Consolidation of Businesses

In business, consolidation occurs when two or more businesses combine to form one new entity, with the expectation of increasing 澳洲幸运5官方开奖结果体彩网:market share and profitability and the benefit of combining talent, industry expertise, or technology. Also referred to as 澳洲幸运5官方开奖结果体彩网:amalgamation, consolidation can result i🅠n the creation of an entirely new business entity or a subsidiary of a larger firm. This approach may co💃mbine competing firms into one cooperative business.

For example, in 2015, Target Corp. mov👍ed to sell the pharmacy portion of its business to CVS Health, a major drugstore chain. As part of the agreement, CVS Health intended to rebrand the pharmacies operating within Target stores, changing the name to MinuteClinic. The consolidation was frienꦓdly in nature and lessened overall competition in the pharmacy marketplace.

A consolidation differs in practical terms from a merger in that the consolidated companies may alsoﷺ result in a new entity, whereas in a merger, one company absorbs the other and remains in existence while the other is dissolved.

Consumer Debt Consolidation

Within the consumer market, consolidation incl♑udes using a single loan to pay off all of the debts that are part of the consolidation. This transfers the debt owed from multiple creditors, allowing the consumer to have a single point of payment to pay down the total.

Often, 澳洲幸运5官方开奖结果体彩网:debt consolidation achieves m⭕ore manageable monthly payments and may result in a lower overall interest rate. For instance, it may wrap a high-interest credit card payment into a more reasonable home equity line of credit (HELOC).

Consolidation in Technical Analysis and Trading

Consolidation is also a technical analysis term referring to security prices oscillating within a corridor and is generally interpreted as market indecisiveness. Put another way, consolidation is used in 澳洲幸运5官方开奖结果体彩网:technical analysis&nb♕sp;to describe the movement of a stock’s price within a well-defined pattern of trading levels.

Consolidation is generally regarded as a period of indecision, which ends when the price of the asset moves above or below the prices in the trading pattern. The consolidation pattern in price movements is broken upon a major news release that materially affects a security’s performance or the triggering of a s✤uccession of limꦗit orders.

Consolidation isꦇ also defined as a set of financial statements that presents a parent and a subsidiary company as one company.

The Bottom Line

In financial accounting, to consolidate is for all subsidiaries to report in financial statements under the umbrella of a parent company. In business, to consolidate is for smaller companies to unite with larger companies through mergers and acquisitions (M&A).