Limitations the Lender Imposes on the Borrower on the Amount

question 112

True/False

Limitations the lender imposes on the borrower on the amount of dividends that can be paid, the level of salaries and bonuses that may be given to the borrower's employees, the total amount of indebtedness that can be assumed by the borrower, and investments in plant and equipment and acquisitions are called affirmative covenants.

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Definitions:

Fixed Component

A cost or value that remains unchanged regardless of the level of output or activity, such as rent or salaried wages.

Mixed Cost

A cost that contains both variable and fixed cost elements, changing in total with changes in activity level but not in the same proportion.

Electrical Cost

The financial outlay for electricity usage, often a significant part of operational expenses for businesses and households alike.

Contribution Margin

A financial metric that represents the difference between a company's sales revenue and its variable costs. It is used to analyze the profitability of individual products.