The Following Restrictions May Be Included in a Debt Covenant

question 24

Multiple Choice

The following restrictions may be included in a debt covenant, except:

• A) restriction in the amount of dividends distributed as a percentage of profit.
• B) restriction in using fair value to measure value of assets.
• C) restriction in undertaking mergers and takeovers.
• D) restriction in the maximum level of borrowings.

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Definitions:

Reverse Stock Split

A corporate action that reduces the number of a company's outstanding shares and increases the share price proportionately.

Shares Outstanding

The cumulative amount of shares of a company presently held by all shareholders, encompassing large quantities owned by institutional investors and private shares held by company insiders.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer, which may not reflect its market value.

Stock Split

A corporate action to increase the number of shares outstanding by issuing more shares to current shareholders, often to make the stock more affordable to investors.