Which of the Following Is Not an Example of a Negative

question 57

Multiple Choice

Which of the following is not an example of a negative covenant?

• A) Borrowers may not sell accounts receivable to generate cash.
• B) The borrower is required to maintain a minimum level of net working capital.
• C) Constraints associated with fixed assets regarding the liquidation,acquisition and encumbrance.
• D) Constraints associated with consolidation,merging or combining with another firm.
• E) All of the above are examples of negative covenants.

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Definitions:

Allowance for Doubtful Accounts Method

The allowance for doubtful accounts method involves estimating and deducting the amount of receivables that may not be collected from the accounts receivable balance.

Accounts Receivable

Pending payments to a company from its customers for merchandise or services that have already been given.

Allowance Method

An accounting technique used to estimate and account for bad debts expense, building an allowance for doubtful accounts.

Bad Debts Expense

The cost associated with accounts receivable that a company cannot collect and thus writes off as a loss.