The formula to calculate the Effective Ownership (EO) is:
\[ EO = DO + (IO \times \frac{OPIE}{100}) \]
Where:
Let's say the direct ownership (\( DO \)) is 30%, the indirect ownership (\( IO \)) is 20%, and the ownership percentage in the intermediate entity (\( OPIE \)) is 50%. Using the formula:
\[ EO = 30 + (20 \times \frac{50}{100}) \]
We get:
\[ EO = 30 + 10 = 40 \% \]
So, the Effective Ownership (\( EO \)) is 40%.
Effective ownership refers to the actual percentage of ownership that an individual or entity has in a company or asset, taking into account both direct and indirect ownership stakes. This concept is important in understanding the true level of control or influence one has over an entity, especially in complex ownership structures where ownership is spread across multiple layers of entities. Effective ownership is calculated by combining direct ownership with the proportionate share of indirect ownership through intermediate entities.