What is the primary advantage of forming a group of companies?

Enhanced competition among subsidiary companies.

Isolation of financial risks within the group.

Elimination of legal requirements for subsidiary companies.

Centralized decision-making process for all companies in the group.

According to the Companies Act 2013, when is a company considered a subsidiary of another company?

If it operates under the same business name.

If its equity share capital is less than half of the holding company's.

If it controls the board of directors of the holding company.

If it is engaged in similar business activities as the holding company.

Which of the following best describes the concept of a "wholly owned subsidiary"?

A subsidiary company that is owned by multiple holding companies.

A subsidiary company that is fully controlled by a single holding company.

A subsidiary company that operates independently without any control from the holding company.

A subsidiary company that holds a majority of shares in its holding company.

In the context of group companies, what does the term "decentralisation of financial risk" imply?

Distributing financial responsibilities equally among all companies.

Transferring financial risks to the holding company.

Minimizing the importance of financial management.

Reducing the impact of financial losses by involving multiple companies.

Which advantage of operating as a group of companies involves minimizing the impact of failures?

Efficient supply chain management.

Decentralisation of financial risk.

Enhanced decision-making process.

Which of the following statements accurately defines a holding company?

A holding company is a company that merges with other companies to form a larger entity.

A holding company is a company that controls the composition of the board of directors of its subsidiaries.

A holding company is a company that operates in the same industry as its subsidiaries.

A holding company is a company that solely relies on its subsidiary companies for financial support.

Which aspect of a subsidiary company's identity is retained even within a group of companies?

Board of directors' composition.

What legal requirement might lead to the formation of a subsidiary company?

Acquisition of controlling interest by the holding company.

Requirement for diversification of business activities.

Necessity to have a centralized board of directors.

How does a holding company establish control over a subsidiary's board of directors?

By acquiring a majority of shares in the subsidiary.

By merging with the subsidiary company.

By appointing its own board members to the subsidiary.

By influencing the subsidiary's financial decisions.

What is the key advantage of a company diversifying its business activities through a subsidiary acquisition?

Reduced overall cost of doing business.

Enhanced competition among subsidiary companies.

Centralized decision-making process.

Ability to diversify with minimal cost.

Holding Companies - 1 Free MCQ Practice Test with Solutions

	Advanced Corporate Accounting 89 videos\|52 docs\|22 tests

	Advanced Corporate Accounting 89 videos\|52 docs\|22 tests

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