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In the Margin of Safety calculations, what should be included under Shareholder's Equity?

In the Margin of Safety calculations, what should be included under Shareholder's Equity?

Your specific question concerned the data available on the HSBC web site which shows both Shareholders Equity and Minority Interests. Which of these should be included in Shareholders Equity?

Minority interest arises where a company does not fully own a subsidiary. So, suppose a company owns only 80% of a subsidiary. It follows that 20% of the shareholders funds of the subsidiary do not belong to the shareholders of the parent company, but to the minority 20% shareholders in the subsidiary.

In their accounts, companies must show what belongs to the shareholders and what belongs to the minority interests. You should exclude minority interests when using Shareholders Funds in a ratio.

However, before you go and over complicate things, don't be too worried if minority interest is very small. Just forget it.

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