Companies that agree to debt covenants with lenders when taking on loans often make promises to ________ (choose three options).
A)maintain specified profitability, liquidity, or other financial ratios
B)seek the lender's permission before taking on new borrowings
C)seek the lender's permission before acquiring other companies
D)maintain high technological standards in its production processes

Question

Quizplus · Accepted Answer

Debt covenants are agreements made between borrowers and lenders to ensure that the borrower complies with certain terms and conditions. These terms may include maintaining specified profitability, liquidity, or other financial ratios, seeking the lender's permission before taking on new borrowings, and seeking the lender's permission before acquiring other companies. While maintaining high technological standards may be important for certain types of businesses, it is not typically a requirement in debt covenants.

Companies That Agree to Debt Covenants with Lenders When Taking