Which of the Following Is a Typical Bond Covenant Restriction

question 17

Multiple Choice

Which of the following is a typical bond covenant restriction on mergers and acquisitions?

• A)Funding for acquisitions cannot include new debt.
• B)Acquisitions can be made only once existing debt has been paid.
• C)Mergers are allowed only if the combined firm's earnings exceed some threshold.
• D)Mergers are allowed only if the combined firm has a minimum ratio of net tangible assets to debt.
• E)Mergers are allowed only if the combined firm has a lower cost of issuing new debt.

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Definitions:

Business Transactions

Financial or commercial activities that involve the exchange of goods, services, or information between businesses or within a business.

Virtue

A trait or quality deemed to be morally good and thus is valued as a foundation of good moral being.

Moral Standards

The principles of right and wrong that are accepted by an individual or a social group, serving as a guide for ethical behavior and decision-making.