What does the term "consolidation" refer to in finance?

The term "consolidation" in finance specifically refers to the process of merging various companies or assets into a single entity. This is often conducted to achieve efficiencies, reduce competition, increase market share, or improve financial performance. Through consolidation, companies can streamline operations, reduce redundancies, and ultimately enhance their competitive position within the market.

This process can take various forms, such as mergers and acquisitions, where two or more companies combine to form a single organization. Consolidation can also occur in asset management, where multiple assets are combined for better management and performance tracking.

In contrast, other options do not accurately reflect the definition of consolidation. Liquidating assets for cash is a separate financial action that involves selling off assets rather than merging them. Forming a joint venture describes a collaborative effort between companies to pursue a specific project while remaining independent entities. Establishing a budget involves financial planning and allocation of resources but does not entail the merging of companies or assets.