Which of the Following Is an Example of an Appropriate

question 61

Multiple Choice

Which of the following is an example of an appropriate loan covenant?

• A) The firm must not increase its debt ratio by more than 3 percent.
• B) The firm must keep its current ratio above 2.2.
• C) The firm must purchase an insurance policy on a key employee.
• D) All of the options are examples of appropriate loan covenants.

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Definitions:

Sarbanes-Oxley Act

A U.S. law enacted in 2002 to protect investors by improving the accuracy and reliability of corporate disclosures, following major financial scandals.

Financial Reports

Documents that detail the financial health and performance of a business, including balance sheets, income statements, and cash flow statements.

Rent Expired

The portion of the rental period that has elapsed or the cost of rent that has been used up over a specific accounting period.

Accounting Period

A specific time span for which financial records are maintained and reported, such as a fiscal year or quarter.