If the parent ____ the debt of the subsidiary, the subsidiary's borrowing capacity might be ____.
A) does not back; increased
B) backs; reduced
C) does not back; reduced
D) backs; increased
E) C and D

Question

Quizplus · Accepted Answer

If the parent does not back the debt, the subsidiary might have reduced borrowing capacity due to perceived higher risk. Conversely, if the parent backs the debt, the subsidiary's borrowing capacity might increase due to perceived lower risk.

If the Parent ____ the Debt of the Subsidiary, the Subsidiary's