If a Parent Company Backs the Debt of a Foreign

question 47

True/False

If a parent company backs the debt of a foreign subsidiary, the borrowing capacity of the parent might be reduced as creditors are not willing to provide as many funds to the parent if those funds may possibly be needed to rescue a parent's subsidiary.

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Definitions:

Dividends Paid

Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Cost of Sales

Direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Inventories

The complete list of items such as property, goods in stock, or the contents of a building.

Accounts Payable

The amounts due by a company to its suppliers or creditors for goods and services received but not yet paid for.