Which of the Following Is Not a Common Debt Covenant

question 34

Multiple Choice

Which of the following is not a common debt covenant restriction?

• A)Maintenance of a minimum level of retained earnings before dividends can be paid.
• B)Maintenance of a minimum working-capital ratio.
• C)Specification of a maximum debt-equity ratio.
• D)Specification of a minimum earnings per share.

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Definitions:

Residual Value

The anticipated worth of an asset at the conclusion of its lifespan, once depreciation has been accounted for.

Useful Life

The estimated period over which a fixed asset is expected to be useful for the purpose it was acquired by a company.

Net Present Values

A method used in capital budgeting to evaluate the profitability of an investment, calculated by subtracting the initial investment from the present value of future cash flows.

Present Value

The contemporary value of future financial inflows or a lump sum, adjusted for a particular rate of return.