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:

Consideration

Consideration in leadership and organizational behavior refers to the extent to which a leader shows care, concern, and respect for followers' needs and feelings.

Psychological Closeness

The feeling of proximity and intimacy towards another individual or group, which may not necessarily correspond to physical distance.

Misleading Statement

A declaration or assertion that is intended to deceive or lead a person away from the truth or accurate understanding.

Situational Leadership Model

A leadership theory proposing that the most effective leaders adapt their style according to the maturity and capability of their followers and the specifics of the situation.