The Purpose of the Restrictive Debt Covenant That Requires That

question 103

Multiple Choice

The purpose of the restrictive debt covenant that requires that subsequent borrowing be subordinated to the original loan is to

• A) ensure that certain key employees are maintained.
• B) limit the amount of fixed-payment obligations.
• C) ensure a cash shortage does not cause an inability to meet current obligations.
• D) protect the lender by maintaining its position in the priority of claims in the event of liquidation.

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