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:

Lump Amount

A single large sum payment or investment, as opposed to smaller, regular payments or investments.

Retirement

The period in life when one chooses to permanently leave the workforce behind, usually upon reaching a certain age or financial standing.

Compounded Semi-Annually

A method where interest is calculated and added to the principal at six-month intervals, resulting in interest on interest.

Annuity

A series of equal payments at regular intervals.