A Company Has a Debt Covenant in Place That Limits

question 73

Multiple Choice

A company has a debt covenant in place that limits the amount it can borrow to 50% of its tangible assets.If the company's actual value for that ratio is approaching violation of this debt covenant,consistent with PAT,management would try to relax the constraint by:

• A) switching from straight-line depreciation to reducing balance method.
• B) increasing allowance for doubtful debts from 5% to 10%.
• C) increasing provision for warranty expenses.
• D) revaluing assets upwards.

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Definitions:

Situation Comedies

A genre of comedy television programs that revolve around a fixed set of characters in a relatively consistent setting, often focusing on humorous situations.

Moral Lesson

A fundamental principle or ethical instruction derived from a story, experience, or event intended to guide one's moral conduct.

Prosocially

Acting in a way that is beneficial to others or society as a whole.

Piliavin

A reference to Irving Piliavin, a social psychologist known for his research on prosocial behavior, including the bystander effect.