A Parent Corporation Will Be Liable to Creditors of a Subsidiary

question 45

Multiple Choice

A parent corporation will be liable to creditors of a subsidiary corporation

• A)only if the parent corporation and the subsidiary corporation have exactly the same directors.
• B)only if the subsidiary corporation is a private (non-distributing)corporation.
• C)only if the parent corporation owns more than 50 percent of the shares in the subsidiary corporation.
• D)only if the parent corporation owns 100 percent of the shares in the subsidiary corporation.
• E)none of the above

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Definitions:

Debt-to-Assets Ratio

Debt-to-Assets Ratio is a financial ratio indicating the proportion of a company's assets that are financed through debt, used as a measure of financial leverage.

Quick-Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, calculated as (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities.

Common Size Income Statements

A financial statement in which all line items are expressed as a percentage of revenue, allowing for easy comparison across companies and time periods.

Revenues

The aggregate revenue from selling goods or providing services which constitute the core business activities.