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:

Common Stock

Stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, inventories, and meeting other short-term liabilities.

Long-Term Investment

Financial assets or securities that are held for an extended period, typically for several years or more, with the expectation of substantial returns.