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When it comes time to report results, consolidated financial statements and stand-alone statements provide two ways of looking at the companies' performance.
A consolidated financial statement covers the activities of the parent company and its subsidiaries in a single report, as if they were all a single company operating under one roof.
Organizing Your Information Setting Up a Worksheet Combining Financial Statements Eliminating Duplicate Values Community Q&A Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.
After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large corporation, or parent company.
A combined financial statement shows financial results of different subsidiary companies from that of the parent company.
The complete financial statement of one subsidiary is shown separately from another as a stand-alone company.
The benefit of combined financial statements is that it allows an investor to analyze the results and gauge the performance of the individual subsidiary companies separately.
Companies commonly break out their consolidated statements by division or subsidiary so investors can see the relative performance of each, but in many cases this is not required, especially if the company owns 100% of the division or subsidiary.
To learn more about how to read consolidated financial statements, click here to check out our tutorial, Financial Statement Analysis for Beginners.
Consolidated financial statements aggregate the financial position of a parent company and its subsidiaries.