Which statement correctly describes a holding company or parent corporation?

A holding company or parent corporation is primarily defined by its ability to control other companies through its stock ownership and the election of management. This means that it typically owns a significant number of shares in one or more corporations, allowing it to have a say in the management and operational decisions of those companies. By holding controlling interests in these subsidiaries, the parent corporation can effectively implement its strategic objectives across the entire corporate family.

The aspect of management election is significant because it allows the holding company to influence not just financial decisions but broader management policies and practices, ensuring that its interests are prioritized. This structure provides the parent with leverage to coordinate operations and align the subsidiary’s goals with the overall vision of the holding company.

In contrast, while holding companies may aim for financial gain, the primary characteristic is not merely holding investments for profit; it's about control and governance. The other options incorrectly reflect the nature of a holding company. For instance, a holding company does not operate purely as part of a common system without ownership and is not controlled by its subsidiaries; rather, it exerts control over them through ownership and decision-making processes.