Is capital structure based on parent-company or consolidated account?
From the point of view
of valuation or solvency analysis, capital structure is assessed on the consolidated
level, in order to highlight all financial and bank debt financing all the group's
operating assets. Special attention should be paid to supplier debt and financial
debt and to non-consolidated subsidiaries.
From the point of view liquidity, you should pay special
attention to the group's structure. Naturally, we want to avoid a situation
in which the parent company is leveraged but not the subsidiaries and do not
or cannot pass on to the parent company a portion of their cash flow in the
form of dividends. The parent company can then only service its debt by gradually
selling off assets, perhaps at fire-sale prices. This is what famously happened
to Vivendi Universal, whose problem has never been solvency but rather liquidity.
Fortunately, such situations are easier to resolve.
So from the point of view of liquidity, the distinction between parent-company accounts and consolidated accounts is key.