The Purpose of the Restrictive Debt Covenant That Prohibits the Sale

question 75

Multiple Choice

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

• A)assure the lender that additional borrowing is constrained
• B)limit the amount of fixed-payment obligations
• C)prevent the firm from selling current assets to raise cash to pay current obligations
• D)limit the payment of annual cash dividends

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Definitions:

Conduct Disorder

A serious behavioral and emotional disorder marked by aggressive, deceitful, or destructive behavior.

Bullies

Individuals who use power, strength, or influence to harm or intimidate those who are weaker, often through repeated aggressive or manipulative behaviors.

Autonomous Interdependence

The concept where individuals are self-governing yet maintain a sense of mutual reliance and connection within their relationships or groups.

Fair-Weather Cooperation

An interaction wherein individuals cooperate with others only when it is to their immediate benefit or when conditions are favorable.