The concept of “consolidation” in different fields of activity

In general, consolidation (from the Latin con - “together” and solido - “strengthening”, “merging”) is the consolidation, strengthening of something. This term also refers to the unity of individual groups or organizations for common goals.

In the market, consolidation occurs through the merger of several companies into one (M&A). For example, in 1999 there were about 300 air carriers in Russia, each airport had its own base airline (the carrier performed its main service there). 20 years later, the number of companies had tripled, with 35% of them accounting for more than 99% of passenger traffic.

Application in trading

Stock market prices are known to vary substantially by chance. There are actually patterns that drive price movements, but they are incredibly complex. One way to deeply study and understand how quotes change is to use technical analysis.

With this approach, the trader monitors how the price has changed previously, and on this basis makes assumptions about what will happen to it next. In order to carry out analysis, you need to be able to distinguish between different situations when prices change.

One of these approaches is to divide the chart into trend and horizontal sections. With an increasing trend, you can see that the general direction is growth. This can be seen despite fluctuations in quotes. A downward trend corresponds to a downward movement of the chart.

However, you can often see price consolidation after sharp changes. In this case, it oscillates and approximately maintains a horizontal direction. Despite the fact that the price makes almost no sudden movements, consolidation allows an experienced trader to find good chances to make money.

• How to make money on stocks;
• Where to start trading on the stock exchange;

Causes

In the foreign exchange and stock markets, strengthening positions depends on a combination of characteristics:

• profitability and liquidity of the asset;
• trade volume, etc.

One of the main reasons for the occurrence of the process is the balance between supply and demand. That is, the asset is bought well and sold often. A sharp decrease in the activity of traders also leads to temporary stabilization of the market.

Similar situations arise during vacations and major holidays. Prolonged stagnation confirms consolidation. It also signals the transition of the rate to a state of lateral movement - flat. For security reasons, trading during this period is not advisable.

Consolidation in the financial sector

By doing business, you can make significant profits. However, this requires that activities take place within the strict framework of the law. This is monitored not only by the company itself, but also by the state. In order to provide him with all the data necessary for control, the enterprise is obliged to submit financial and other reports.

Sometimes a company grows and branches are formed within it, which become virtually independent business units. However, their reporting can be viewed in two ways: separately or as part of the entire enterprise.

In the latter case, general figures will be presented characterizing the activities of the entire company as a whole. If necessary, they can be analyzed in more detail. The state needs both types of reporting for control. The one that presents data relating to the entire enterprise is called consolidated.

A similar situation arises when preparing reports for companies included in the holding. Figures that characterize the activities of all companies included in it are shown in consolidated statements. Typically it includes the following data:

1. About income received and expenses incurred.
2. Cash flow statement.
3. Data related to the assessment of changes in the capital of an enterprise.

The ability to obtain information about the situation as a whole allows you to increase the efficiency of doing business.

There are various ways to carry out such consolidation:

1. When using the proportional method, not all assets are taken into account, but only those owned by each selected structural unit.
2. When full consolidation is applied, the financial statements include all existing assets.
3. If the equity principle is used, then assets are considered taking into account investments made in other enterprises.

When preparing consolidated financial statements, it is necessary to exclude those transactions that occur between organizationally independent units. In fact, they will be counted twice, which will need to be eliminated before the final figures can be determined.

• Concern;
• Oligopoly;
• Cooperative;
• Monopolism;

Legal consolidation

Legislation determines the life of the state, firms, organizations, and individuals. Over time it improves. At the same time, new regulations are issued and old ones are repealed. A large number of laws and regulations are gradually accumulating.

In order to understand the legal requirements, it is necessary to study a large number of provisions related to the desired issue. To simplify the use of laws, new regulations are issued that include all the necessary information on a specific issue. This process is called legislative consolidation.

The distinctive features of this procedure are the following:

1. The new act becomes fundamental in its field. It formulates general principles relating to it. They determine the general nature of the document.
2. This document regulates various types of legal relations, which are brought into a single system.
3. The act is consolidated, including the content of all or most previously adopted legal documents. The provisions that were considered in them are interconnected.
4. As a result, carefully thought-out norms are created on the basis of previously adopted regulations, which are sustainable and will become the basis for decision-making over a long period of time.
5. Subsequently, the created act becomes the basis for further legal development.
6. In most cases, the act created as a result of consolidation is voluminous and has a complex structure.

This procedure makes it possible to make the provisions more understandable and eliminate possible contradictions in the interpretation of documents.

Consolidation should be distinguished from codification. In the latter case, there is also a systematization of legislation in a specific area. This creates a document that includes the results of previously adopted official changes. However, in this case, it simply reflects the result of lawmaking in a compact form, but is not adopted by the legislative bodies separately, in accordance with the official procedure.

Codified documents can be drawn up not only by lawyers, but, for example, presented in the legal or accounting press for the convenience of readers. In this case, they will be correct to the extent that their drafters worked with the regulations carefully and carefully.

Qualitative characteristics of KFO

Among the qualitative characteristics of the data contained in the CFD, the following can be distinguished:

• Understandability (in order for the prepared combined data to be used in practice, it must be understandable);
• reliability (information should not contain inaccuracies or errors);
• materiality (must contain information, the absence of which could negatively affect decisions made on its basis);
• comparability (the information contained in the CFR should enable interested parties to perform analysis, track the dynamics and development prospects of the enterprise by comparing data for different reporting periods and for different reporting dates, as well as data from different companies with each other);
• relevance (the relevance of information is determined by its nature; in the CFD, information should allow one to evaluate past, current and future events).

Loan consolidation

When you need funds, one way to get them is to go to a bank to get a loan. This is an effective method, but then over the course of many years you will have to repay the borrowed amount with interest.

There may be situations where a company has taken out several loans and is paying them off. In such a situation, loan consolidation can be performed. After this operation, the company will have to repay one loan, which will take into account everything that it previously borrowed.

The benefit of this operation is that often in such a situation the bank sometimes agrees to reduce the interest that must be paid. Of course, specific terms become the result of negotiations when preparing a new agreement.

In this situation, how many creditors an individual or legal entity has plays a big role. This operation is easier if there is only one creditor, and becomes more troublesome if we are talking about different ones.

One of the ways for such consolidation is refinancing. In this case, a loan is taken from which all existing loans are repaid. After this, you need to start giving it away. Usually it is concluded so that the deadline for returning the money is later.

• Debt restructuring;
• Loan refinancing;
• Credit history;
• If you don’t pay the loan, what will happen and what to do;
• Mortgage - how it differs from a loan;

Trend

A trending market always moves in one direction. At the same time, the price runs up/down, but the overall vector of movement remains unchanged. And any price movement against the general trend becomes just a rollback.

You already know the simplest and most effective tool for determining a trend. These are the trend lines:

Let us remember: if the price shows an update of the upper highs and upper lows, this is an uptrend.

If there are lower highs and lower lows, it is a downward trend.

Some currency pairs or assets are more trendy because their liquidity leads to increased volatility and, accordingly, larger and tasty trends. A trend is a trend in Africa too. Everything in price movement is subordinated to it. The trend can be determined not only by lines or channels, but also by other methods, say, technical indicators.

ADX for trend

The ADX (Average Directional Index) indicator, the brainchild of Wells Wilder, was created specifically to identify trends. If ADX is greater than 25, on a scale from 0 to 100, this is one indication of a trend. However, like all indicators, ADX does not predict the future at all, but simply gives one of the clues.

Interestingly, ADX is not related to direction. It will always go up when the trend grows, and it doesn’t matter whether the trend is up or down.

Here's an example. The price is going down, ADX is steadily above 25 (to indicate which we drew a horizontal line at level 25).

Trends and moving averages

If ADX is not your thing, you can use good old moving averages to determine the trend. We have already discussed that it is convenient to use three moving averages to determine momentum. Let's take three moving averages with periods of 7, 20 and 65. We are waiting for their intersection, then the moving averages should line up beautifully one above the other. If 7 is above 20, and that is above 65, we have eloquent evidence of a trend.

If the moving averages are lined up in the opposite direction, the trend goes down. You should already know all this from the Moving Averages lesson.

Trends and Bollinger Bands

Another way to spot trends is to use Bollinger Bands. One of the most popular indicators in the world. Let's say, when I collected a library of 150 strategies for binary options, most of all, in percentage terms, there were variations of these bands.

Trends, it must be said, are not such a frequent visitor to the foreign exchange market. I mean real, strong, fast trends. Basically, the market prefers to be in one or another sideways pattern - a type of consolidation. If the market is resting sideways, sooner or later it will go into a trend. To determine this, we will use a slightly tricky method and place as many as two bollinger bands, offset in relation to each other.

To offset one band, we will assign a value of 1 for the StdDev parameter, and leave the second with a base value of 2. This allows us to better identify consolidation and trend zones.

The area for sale is immediately visible. It is located between the two lower bollinger bands with offsets 1 and 2. In this case, the candles should not go beyond the second, inner band, thanks to which we will be convinced of the strength of the downward trend. For an upward trend, the opposite is true. The candles will be located between the top two bands.

But when the candles are in the internal channel, this is Her Majesty consolidation. Neither fish nor fowl. There is no trend, but there is a channel of support/resistance, which is good to exploit if you switch to lower timeframes. Bollinger Bands are a very popular method for identifying trends and are worth a try.

Example from a live chart:

Business consolidation

Business development depends not only on the resources available, but also on how effectively it is managed. Not everyone who starts a business can succeed. However, if significant results have been achieved, then further expansion is necessary. One way is consolidation. In this case, several companies unite under common management. Then a holding is formed in which general management is carried out.

This step is beneficial, for example, in cases where firms that have similar products merge. It is also beneficial if part of the technological chain for producing the final product is combined.

• Separate units;
• Who is the counterparty;
• What is commerce;
• “LLC” or “IP” - which is better;
• Small business;

Government

It is known that it is beneficial for effective public administration when the various branches of government are independent. As you know, we are talking about the executive, legislative and judicial powers. Each of them has its own important functions:

1. The legislature makes laws, but does not control their implementation.
2. The executive implements public administration in accordance with adopted regulations. She does not have the right to approve those laws that are beneficial to her.
3. The judiciary must objectively and impartially determine the guilt of those who have broken the law and impose appropriate punishment.

However, in real life such independence is rarely provided. In some cases, government agencies are given opportunities that span multiple branches of government. This phenomenon allows them to significantly increase their existing capabilities. In this case, it is noted that there is a consolidation of power.

Organizations providing CFO. Who is required to prepare consolidated financial statements?

CFOs are formed by many corporate companies, corporations and holdings, but there is a decisive condition under which a CFO can be formed at all - the parent company has the right to determine the decisions made by the lower-level one. Otherwise it is impossible.

In Russia, at the legislative level, a list of enterprises is required to form and provide CFO. Those who submit consolidated statements include:

• all kinds of non-state pension funds;
• clearing companies that determine and record claims and obligations on securities;
• credit and insurance structures (except for those working in the field of medicine);
• any organizations with securities offered for auction.

Currency consolidation

This concept refers to a country's foreign exchange reserves. Typically, those funds that the state has been able to accumulate are stored in the form of gold and foreign exchange reserves. In this case, only those currencies that are considered the most reliable are used. The euro and American dollar are most often used in this capacity.

However, part of the funds remains in the national currency. If inflation processes intensify, its value may decrease significantly. To prevent this from happening, it is necessary to convert the funds in question into hard currency. This procedure is called consolidation of the country's foreign exchange reserves.

• List of protective assets;

When trading shares

Working as a trader on the stock exchange is associated with high risk. To make a profit, you must always balance risk and return. Typically, in order to reduce the risk of losses, traders work with different types of stocks.

Riskier ones can bring significant profits, but their use is associated with significant possible losses. There are assets that are considered reliable, but low-profit. They will allow you to earn a little money, but are not very risky.

• Profitability and risks of the investment portfolio;

If a trader has made a profit as a result of working with high-risk stocks, then it would be a wise step to invest part of the profit in more reliable ones. This operation is called profit consolidation.

• Investing in shares - a detailed guide;
• Stock return - what is it made up of;
• How to choose undervalued stocks based on multiples;
• What determines the price of shares;
• Simple strategies for buying shares;

Key challenges to consider

The QFO allows management to make important management decisions regarding the Civil Code, but the preparation of the QFO is associated with a number of difficulties, among which the following can be highlighted:

• A large number of organizations included in the Civil Code, their complex and opaque structure can complicate the process of consolidating reporting;
• Companies included in the Civil Code may keep records in different currencies; additional conversion procedures will be required;
• The accounting policies of organizations included in the Civil Code may differ; this will not allow preparing financial statements automatically; it will be necessary to resort to additional adjustments;
• The end dates of the reporting period may not be the same for different organizations;
• If the data of any lower-level organization is provided untimely, there will be a delay in the preparation of the final financial statements, the information may lose its relevance and become unclaimed at the time of submission of consolidated statements;
• Due to insufficient training of the personnel preparing the reports, errors may appear in the CFO, which will make the report data unreliable.

Consolidation in psychology

Human memory allows a person to accumulate knowledge. It is a very complex process. In particular, it is known that it is divided into short-term and long-term memory. In the first case, a large amount of information is recorded, but for a short period of time.

Over time, selection is made, and a small part of the information passes into long-term memory. This process is called consolidation. Scientists believe that the transition to long-term memory mainly occurs during sleep.

• Human capital;

Requirements for CFO

There are a number of requirements for the CFO:

• The accounting policies applied by the management company and lower-level firms must be the same;
• Mandatory formation in the same currency and in the same language;
• A single date has been established for the submission of reports by lower-level organizations to the management company;
• Prepared by all members of the Civil Committee;
• Contains reliable information;
• An audit report must be drawn up based on the developed CFR.

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Consolidation in sociology

A person carries within himself not only personal characteristics, but also those traits that are inherent to his society and people. Sometimes, due to certain historical events, two or more small groups merge into one. Gradually, one group is formed from them with its own characteristics and traditions. This is what consolidation looks like in sociology.

There is another variety of it. Sometimes the national community becomes more homogeneous and powerfully united. The internal unity of an ethnic group makes it stronger and more viable. This process is also called consolidation.