A subsidiary that engages in business with other parties. That is, an operating unit has its own assets and liabilities and functions as if it were an independent company; the only difference is that it is owned by another company. An operating unit is useful for the profit it can produce. It contrasts with a nonoperating unit.
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A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon Capital Cities/ABC became an operating unit of Disney. A decade earlier Capital Cities had acquired ABC. Compare nonoperating unit.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.