A Covenant That Restricts a Company from Making Loans or Otherwise

question 78

Multiple Choice

A covenant that restricts a company from making loans or otherwise providing credit is best viewed as a restriction on which of the following?

• A)Asset disposition
• B)Issuing new debt
• C)Dividends and share repurchases
• D)Mergers and acquisitions

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Definitions:

Ordering Costs

The expenses associated with placing and receiving orders for inventory, including costs related to processing, shipping, and handling.

Accounts Receivable

Receivables from customers for goods or services already supplied by the company but payment has not been made.

Accounts Payable

Liabilities to creditors, representing the obligation to pay for goods and services received, usually within a short period of time.

Economic Order Quantity (EOQ)

A formula used by businesses to determine the optimal order quantity to minimize total inventory costs.