Which of the Following Is NOT True of Restrictive Covenants

question 14

Multiple Choice

Which of the following is NOT true of restrictive covenants?

• A)They sometimes require borrowers to maintain the value of collateral offered to the lender.
• B)They increase the marketability and liquidity of loans.
• C)They sometimes require a borrower to maintain a certain minimum level of net worth.
• D)They sometimes limit a borrower's risk taking.

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Definitions:

Retained Earnings

The portion of a company's profits that is held or retained and not paid out as dividends to shareholders, often used for reinvestment in the business.

Dividends

Profits distributed by a corporation to its shareholders from its earnings.

Classified Balance Sheet

A detailed financial statement that separates assets, liabilities, and equity into subcategories for clearer analysis.

Assets and Liabilities

The financial resources owned by a company (assets) versus what it owes to outsiders (liabilities).