What Is a "Covenant

question 70

Multiple Choice

What is a "covenant"?

• A)Guarantee of the price to the borrower.
• B)Contract that outlines the terms of the borrowing agreement.
• C)Promise from the borrower to restrict certain activities.
• D)Feature that permits the issuer to redeem before maturity.

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Definitions:

Accounts Receivable

Funds that clients or customers owe to a company for products or services that have been provided but not yet compensated for.

Necessary Cash

The minimum amount of cash required by a company to carry out its day-to-day operations.

Contra Asset Account

An account on a company's balance sheet representing deductions from the gross amount of an asset, such as accumulated depreciation on fixed assets.

Allowance for Doubtful Accounts

An accounting method used to estimate the portion of a company's receivables that may not be collected, reducing the accounts receivable balance accordingly.