How harmful is it for kids to witness their parents fighting?

Kids are great imitators of what happened to their surroundings they adopt it. my husband and I don't fight in front of my daughter as a result of what I observed she is a happy kid with confidence, behaves well and is respectful with others. I have a friend who always shouts with each other and fights even in front of us. Their kids have bad behaviour, bad temper, whine about over small things, attention seek and shout. We decided not to come to the party when we know all of her family is present, especially his husband. She's aware that most of our friends don't like it. She ends up going to the gathering alone or with only one kid. My husband does not like our daughter playing with her kids because they usually push other kids, curse or shout. There is an incident in which they are shouting at each other suddenly the one kid from another parent asked her why they are always shouting at each other why you always mad. I think she feels embarrassed receiving that comment from another kid. My daughter at that time is still not yet conversational and she is not exposed to this kind of environment she ended up just staying on my lap because she was afraid of my friend.