An Example of a Negative Covenant That Might Be Found

question 20

Multiple Choice

An example of a negative covenant that might be found in a bond indenture is a statement that the company:

• A) shall maintain a current ratio of 1.1 or higher.
• B) cannot lease any major assets without bondholder approval.
• C) must maintain the loan collateral in good working order.
• D) shall provide audited financial statements in a timely manner.
• E) shall maintain a cash surplus of $100,000 at all times.

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Definitions:

Euphemisms

Mild or indirect words or phrases used to describe something unpleasant or sensitive without causing offense.

Negative Connotations

The association of a word or expression with negative feelings or judgments.

Formal Tone

The use of language that is polite, precise, and devoid of casual expressions, often found in professional or academic settings.

Humour

The quality of being amusing or comical, often expressed through narratives, jokes, or actions.