If the Maximum Debt/equity Ratio as Specified by a Debt

question 91

Multiple Choice

If the maximum debt/equity ratio as specified by a debt covenant is close to being violated, which one of the following actions would increase the likelihood of violating the debt covenant?

• A)Issuing capital stock
• B)Skip current cash dividends
• C)Acquire money by issuing a non-interest-bearing note payable
• D)Acquire money by collecting accounts receivable

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Definitions:

Underinsured Driver

A motorist who has insurance coverage, but not enough to cover the full costs of a claim from an accident.

Depreciation Rate

The rate at which an asset loses its value over time, often used for accounting and tax purposes.

ABS

Stands for Anti-lock Braking System, a safety feature in vehicles that prevents the wheels from locking up during braking, ensuring the driver maintains steering control.

Skid Marks

Visible marks left on a road surface by tires that have lost traction, often as a result of sudden braking.