Upstream Guarantee

AAA

DEFINITION of 'Upstream Guarantee'

A contingent liability on a subsidiary's financial statements in which the subsidiary guarantees its parent company's debt. Upstream guarantees are performed to get better financing terms for the parent or to initiate financing.

INVESTOPEDIA EXPLAINS 'Upstream Guarantee'

An upstream guarantee is often performed in a leveraged buyout situation in which the parent company takes on a substantial level of debt to acquire another firm. Without an upstream guarantee, the offer may not even be able to take place, as there may not be enough collateral on the parent company's balance sheet.

RELATED TERMS
  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Contingent Liability

    A potential obligation that may be incurred depending on the ...
  3. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
  4. Contingent Guarantee

    A guarantee of payment made by a third party, known as the guarantor, ...
  5. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  6. Parent Company

    A company that controls other companies by owning an influential ...
RELATED FAQS
  1. Can a business ever be too small to issue commercial paper?

    There are effective – though not legal – restrictions on the size of commercial paper issuers. Any company can issue commercial ... Read Full Answer >>
  2. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
  3. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
  4. What are the pros and cons of using the fixed charge coverage ratio?

    One main advantage of using the fixed-charge coverage ratio is it provides a good, fundamental assessment for lenders or ... Read Full Answer >>
  5. What are the disadvantages of using the sinking fund method to depreciate an asset?

    Using the sinking fund depreciation definitely impinges on a company's cash flow and profitability during the depreciation ... Read Full Answer >>
  6. How does inventory accounting differ between GAAP and IFRS?

    There are three common methods for inventory accountability costs: weighted-average cost method; first in, first out, or ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  4. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  5. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?
  6. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  7. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  8. Fundamental Analysis

    How Microsoft & Apple's Balance Sheets Compare

    Looking at two iconic companies, Microsoft and Apple, whose balance is sheet is stronger and where?
  9. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  10. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center