Which of the Following Would Be Considered a "Positive" Loan

question 43

Multiple Choice

Which of the following would be considered a "positive" loan covenant?

• A) Days receivables outstanding cannot exceed 30 days
• B) No change in senior management
• C) Capital outlays cannot exceed $1,000,000 per year
• D) No additional liens may be placed on the collateral
• E) The bank must approve any firm mergers or acquisitions

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Definitions:

Dividend Tax Credit

Tax formula that reduces the effective tax rate on dividends.

Canadian Corporations

Companies incorporated under the laws of Canada, subject to Canadian corporate regulations and taxation.

Cash Flow To Creditors

A firm’s interest payments to creditors less net new borrowings.

Long-Term Loan

A type of financing that is paid back over an extended time frame, extending beyond one year.