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

When a parent backs the debt of a subsidiary, it provides additional assurance to lenders, potentially increasing the subsidiary's borrowing capacity. Conversely, if the parent does not back the debt, lenders may see the subsidiary as a higher risk, which could reduce its borrowing capacity.

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