Investment Banking Interview Questions

What is non-controlling interest and why do companies have it?

By January 28, 2022No Comments

The investment banking interview question we’re going to go over today is “What is non-controlling interest and why do companies have it?” Non-Controlling Interest is not a very intuitive concept, and so a lot of candidates get this question wrong. Here’s what you can say for your answer.

Interview Answer

“Non-Controlling Interest is the value of the stake in a company’s subsidiary that the company controls but doesn’t own. It’s a line item on the Balance Sheet under the Shareholder’s Equity section. 

Under US GAAP, companies have to include 100% of the financials of all subsidiaries that they control. But occasionally, companies control subsidiaries that they don’t own 100% of. And so to reflect the fact that there’s value belonging to other parties, companies record Non-Controlling Interest.”

Additional Tip

To sum up, that’s an example of how you can answer the question: “What is non-controlling interest and why do companies have it”. A common mistake we see candidates make is that they often use the term Minority Interest and Non-Controlling Interest interchangeably. However, the two are not synonymous. The correct term is Non-Controlling Interest, not Minority Interest.

More IBD Interview Questions

What is unlevered free cash flow and how do you calculate it?

What is working capital and what are some examples?

Difference between intangible assets and goodwill

By using Lumovest, you agree to our use of cookies, Privacy Policy and Terms of Service.

Accept