When the parent company is fully responsible for the subsidiary's obligations,

Question

Quizplus · Accepted Answer

When the parent company is fully responsible for the subsidiary's obligations, the independent financial structure of the subsidiary is irrelevant as the parent company will ultimately be responsible for any debts or liabilities. Potential creditors will examine the parent's overall financial condition, not just that of the subsidiary. Therefore, the independent financial subsidiary can have the same capital structure as the parent. All of the options given in the question are correct in this scenario.

When the Parent Company Is Fully Responsible for the Subsidiary's