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What is the difference between subcomponents and folders

Edited

I would like to use the subcomponents plug-in to provide traceability and visibility into our Requirements refinement process (refining high level business requirements into project specific and functional requirements).  I see there is a distinction between a subcomponent and a folder but am having a hard time finding specific documentation defining what this distinction is and how it can be used to organize information to facilitate reporting.

TYiA (Thank You in Advance) for any help, input, guidance and suggestions.

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