The Purpose of the Restrictive Debt Covenant That Prohibits the Sale

question 34

Multiple Choice

The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to

• A) assure the lender that the borrowed funds are put to the use for which they were intended.
• B) limit the amount of fixed-payment obligations.
• C) ensure that a cash shortage does not cause an inability to meet current obligations.
• D) prevent liquidation of assets through large salary increases of key employees.

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Definitions:

Summarizing Data

The process of reducing data to a more comprehensible and concise form, often highlighting the main points or findings.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values.

Variation

The occurrence of differences in characteristics, traits, or outcomes among individuals within a population, group, or process.

Statistically Significant

A term indicating that the likelihood a result happened by chance is low, often used in research to confirm the reliability of findings.