Subsidiary Financial Management
There are four financial actions you can take with a subsidiary company. Which are available depends on how much of it you own.
| Action | Ownership needed |
|---|---|
| Capital injection | 100% |
| Issue new shares to the public | 50% or more, and the subsidiary must be publicly listed |
| Issue new shares to the parent company | Any subsidiary you control |
| Set the dividend | Any subsidiary you control |
A subsidiary has to be at least 50% controlled before it appears on this screen at all. Shares held by your company and shares you hold personally both count toward that. The figures above are what each action needs on top of that baseline.
Capital injection
If you own 100% of a subsidiary you can put capital straight into it.
Open Financial Actions from the Information Center (or press F11) and go to the Capital Injection page.
Issuing new shares
A subsidiary can issue new shares in two directions: to the public, or to the parent company.
Issuing new shares to the parent company
Issue New Shares to Parent Company funds a subsidiary out of the parent company’s cash, and is available for any subsidiary you control. Where you own 100% of one, capital injection does the same job in fewer steps.
Issuing new shares to the public
Available once you hold 50% or more of the subsidiary — and only if the subsidiary is publicly listed. A private company has no public shareholders to issue to, so the option does not appear until it has gone through an IPO.
It dilutes your own stake. New shares going to outside investors reduce the percentage you hold — which is the trade-off against raising the money from the parent company instead.
Two conditions protect the other shareholders: the new shares must be wholly subscribed by the parent company, and the issuing price must be higher than the current market price. The parent therefore gains no advantage over anyone else holding the stock.
Setting the dividend
For any subsidiary you control, you can either set the dividend yourself or leave it to the subsidiary’s CEO.
Choosing “I will set the dividend” gives you the Dividend Payout Ratio, adjusted with the [+] and [-] buttons.
The Dividend Payout Ratio is the share of earnings paid out to shareholders. The higher it is, the more cash each investor receives when the annual dividend is paid.
Lower down the screen, a graph shows the Actual Dividend Ratio — the latest dividend paid divided by the stock price.
Payout ratio and dividend yield are not the same thing
| Measure | Calculated from |
|---|---|
| Dividend Payout Ratio | Earnings per share |
| Dividend Yield | The stock price |