Security Provisions and Protective Covenants Are Included in Loan Documents

question 17

Multiple Choice

Security provisions and protective covenants are included in loan documents to increase the likelihood that the interest and principal of outstanding loans will be repaid in a timely fashion. Which of the following is not true about security provisions and protective covenants?

• A) Security features include the assignment of payments due under a specific contract to the lender.
• B) Negative covenants include limits on the amount of dividends that might be paid
• C) Limitations on the amount of working capital that the borrower can maintain.
• D) Periodically, financial statements must be sent to lenders.
• E) Automatic loan repayment acceleration if the borrower is in default on any loans outstanding

Identify common errors in accounting records and understand how to correct them.

Understand the structure and significance of the general ledger in the accounting system.

Recognize the importance of consistency and accuracy in financial record-keeping.

Understand the role and ordering of various types of accounts in the general ledger.

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Definitions:

Unilateral Contract

A contract in which only one party makes a promise or obligation to perform a specific action in exchange for a performance rather than a promise from the other party.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States.

Common Law

A body of law derived from judicial decisions of courts and similar tribunals, rather than from statutes or constitutions.

Federal Law

Legislation that has been passed by the United States Congress and applies nationwide.