Author Question: The purpose of the restrictive debt covenant that requires that subsequent borrowing be subordinated ... (Read 20 times)

CQXA · **on:** Jul 11, 2018

The purpose of the restrictive debt covenant that requires that subsequent borrowing be subordinated to the original loan is to ________.

A) maintain a minimum level of liquidity
B) limit the amount of fixed-payment obligations
C) ensure a long-run cash shortage does not cause an inability to meet current obligations
D) protect the original lender in the priority of claims during liquidation

Question 2

The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to ________.

A) assure the lender that additional borrowing is constrained
B) limit the amount of fixed-payment obligations
C) limit the realization of current assets to cash
D) limit the payment of annual cash dividends