Assume that X Corp. controls Y Corp., X constantly purchases and sells Y's voting shares on the open market while always ensuring that it maintains a controlling interest over Y. Which of the following statements pertaining to X buying and selling activity is correct?

A) X's activity has no effect on the non-controlling interest.
B) As X sells shares of Y, the non-controlling interest increases.
C) As X sells shares of Y, the non-controlling interest decreases.
D) As X buys shares of Y, the non-controlling interest increases.

Question

Gabriela Ramcharan · Accepted Answer

Final Answer : B, Explanation :  When X Corp. sells shares of Y Corp., it is reducing its ownership percentage (while still maintaining control). This action increases the proportion of shares held by other investors, effectively increasing the non-controlling interest. Non-controlling interest refers to the equity in a subsidiary not attributable directly or indirectly to the parent company, so as the parent company sells shares, the portion of the subsidiary that it does not own increases.

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