Credit Analysis

Question 1

Structural subordination means that a parent company’s debt:

Answer 1

Structural subordination means that cash flows from a subsidiary are used to pay the subsidiary’s debt before they may be paid to the parent company to service its debt. As a result, parent company debt is effectively subordinate to the subsidiary’s debt.

Question 2

Calculate FFO Funds from operations

Answer 2

FFO is defined as net income from continuing operations plus depreciation, amortization, deferred taxes, and other noncash items.