Which of the Following Is NOT a Common Bondholder Covenant

question 33

Multiple Choice

Which of the following is NOT a common bondholder covenant?

• A)Dividends cannot be paid unless there is sufficient cash to cover the next coupon payment.
• B)Dividends may be prohibited above a certain percentage of current earnings.
• C)If the firm has insufficient cash to cover required coupon payments,shareholders will pay interest directly from their own accounts on a pro rata basis.
• D)All of the above are common bondholder covenants.

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Definitions:

Gross Profit

Gross profit is a company's revenue minus its cost of goods sold, representing the profit made before deducting overheads, payroll, taxation, and interest payments.

Discount Period

The discount period is the timeframe during which a payment can be made at a reduced price or interest rate before returning to its original rate.

Perpetual Inventory System

An approach to inventory management where updates are made continuously as inventory items are bought and sold.

Cost of Merchandise Sold

The total expense incurred to acquire goods that have been sold during a certain period.