Restrictive Covenants

question 21

Multiple Choice

Restrictive covenants

• A)generally require that firms use debt finance rather than equity finance.
• B)generally require that firms use equity finance rather than debt finance.
• C)put restrictions on the use of borrowed funds.
• D)were outlawed under the Civil Rights Act of 1964.

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Definitions:

Double-Declining-Balance

An accelerated method of depreciation which doubles the usual rate of depreciation of assets, allowing for faster write-offs.

Units-Of-Output

A depreciation method that allocates the cost of an asset over its useful life based on the units it produces, reflecting the asset's wear and tear more accurately.

Straight-Line

A method of calculating depreciation or amortization by evenly distributing an asset's cost over its useful life.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, which allocates an equal amount of the asset’s cost to each year of its useful life.