Analyzing Subsidiary Bonds Quiz
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Questions and Answers

What key factor must a subsidiary demonstrate to support its bond?

  • A favorable market reputation
  • Historical performance of the parent company
  • A strong parent company guarantee
  • Its own ability to meet bond obligations (correct)

    • When evaluating guaranteed bonds, which financial statement is primarily utilized?

  • Subsidiary's balance sheet
  • Parent company's cash flow statement
  • Parent company's equity report
  • Consolidated income statement (correct)

    • What is a significant challenge when evaluating unguaranteed subsidiary bonds?

  • Immediate market fluctuations affecting value
  • Availability of subsidiary management
  • Lack of parent company involvement
  • Difficulty in obtaining separate financial statements (correct)

    • Which of the following misconceptions might investors have when purchasing subsidiary bonds?

    <p>The parent's past performance guarantees the subsidiary's success</p> Signup and view all the answers

    What does a thorough analysis of subsidiary bonds require beyond just parent company performance?

    <p>Direct responsibility of the parent to cover the subsidiary bond</p> Signup and view all the answers

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