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Standalone Vs Consolidated Financial Statements: Know The Difference

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10 Jun 2024

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Introduction:

As a stock market investor, you evaluate various parameters to make profitable investment decisions. One such parameter is the issuing company’s financials. While there are several methods to analyse the financials of a listed company, the easiest one is to read the financial statements on the SEBI (Securities and Exchange Board of India) and the company’s website.

As per the SEBI guidelines, all publicly listed companies are mandated to release their financial statements every quarter. These financial statements are of two types – standalone financial statements and consolidated financial statements. While they both offer insights into a company's financial health, they serve different purposes and cater to different stakeholders.

But an important question is, which financial statement should you consider to understand a company’s financial position? This article compares standalone vs. consolidated financial statements to help you comprehend the similarities and differences between the two. Keep reading.

What are standalone financial statements?

Standalone financial statements, as the name suggests, present the financial position, performance, and cash flows of a single entity in isolation. This entity could be a company, a division within a company, or any other distinct business unit. Standalone financial statements provide a snapshot of the financial affairs of that specific entity, without considering its relationship with other entities.

Key components of standalone financial statements

Below are the main components of standalone financial statements:

Balance sheet

Also known as the statement of financial position, the balance sheet outlines the entity’s assets, liabilities, and equity at a specific point in time. It offers insights into the entity's liquidity, solvency, and overall financial health.

Income statement

The income statement, also referred to as the profit and loss statement, details the revenues, expenses, and net income or loss generated by the entity over a certain period. It provides a summary of the company's operational performance.

Cash flow statement

The cash flow statement tracks the cash inflows and outflows from operating, investing, and financing activities during a specified period. It helps you analyse the entity's ability to generate cash and manage liquidity.

What are consolidated financial statements?

In contrast to standalone financial statements, consolidated financial statements provide a comprehensive view of the financial position, performance, and cash flows of a group of entities within a company as if they were a single entity. These statements consolidate the financial information of a parent company and its subsidiaries, presenting them as a unified whole.

Key components of consolidated financial statements

The key components of consolidated financial statements include:

Consolidated balance sheet

A consolidated balance sheet combines the assets, liabilities, and equity of the parent company and its subsidiaries into a single balance sheet. It reflects the group's overall financial position and provides insights into its scale and diversification.

Consolidated income statement

The consolidated income statement amalgamates the revenues, expenses, and net income of the parent company and its subsidiaries. It offers a holistic view of the group's financial performance, accounting for intercompany transactions and eliminations.

Consolidated cash flow statement

Similar to the consolidated balance sheet and income statement, the consolidated cash flow statement aggregates the cash flows of the parent company and its subsidiaries. It showcases the group's collective cash generation and utilisation.