Which of the Following Best Describes the Difference Between a "Financial

question 2

Multiple Choice

Which of the following best describes the difference between a "financial" bond covenant and a "nonfinancial" bond covenant?

• A)A financial covenant ensures that management does not spend beyond yearly budgeted amounts; a nonfinancial covenant ensures that management does not take on too much debt.
• B)A financial covenant ensures that management does not take on too much debt; nonfinancial covenants ensure that assets are insured, among other possible requirements.
• C)A financial covenant requires management to provide financial information to bondholders; a nonfinancial covenant requires management to provide a detailed description of the operations of the company on a yearly basis.
• D)A financial covenant requires that the assets of a company have adequate levels of insurance; a nonfinancial covenant requires management to provide a detailed description of the operations of the company on a yearly basis.