Folder inheritance allows principals to inherit any rights that they have been granted on an object's parent folder. Folder inheritance proves especially useful when you organize BusinessObjects Enterprise content into a folder hierarchy that reflects your organization's current security conventions. For example, suppose that you create a folder called Sales Reports, and you provide your Sales group with View On Demand access to this folder. By default, every user that has rights to the Sales Reports folder inherits the same rights to the reports that you subsequently publish to this folder.
Consequently, the Sales group will have View On Demand access to all of the reports, and you need set the object rights only once, at the folder level. In Folder inheritance example, rights have been set for Red Group on a folder. Rights 1 and 5 have been granted, while the rest have been left unspecified. With folder inheritance enabled, members of Red Group have rights on the object level identical to the rights of the group on the folder level. Rights 1 and 5 are inherited as granted, while the rest have been left unspecified.

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