What does the investment in subsidiary signify for a parent company?

The investment in a subsidiary signifies ownership and control over another entity for a parent company. When a company invests in a subsidiary, it acquires a significant stake, usually more than 50% of the subsidiary's voting stock, which allows the parent company to influence or directly govern the operations and policies of the subsidiary. This control is essential for consolidating financial statements, where the financial results of the subsidiary are reported in the parent company's financial statements. This relationship emphasizes the parent company's ability to make strategic decisions regarding the subsidiary’s operations, financial management, and overall direction, which is distinct from merely holding a financial interest as seen in other types of investments.

Other options imply different relationships with subsidiaries that do not capture the comprehensive nature of control and influence inherent in a parent-subsidiary relationship.