The written agreement between a corporation and its bondholders contains a limitation on the dividends that the corporation can pay.This limitation is:

Question

Quizplus · Accepted Answer

A limitation on dividends is a negative covenant as it limits the actions that the corporation can take. A nonrecourse covenant pertains to the ability of the issuer to repay the bond, and a recourse covenant pertains to the ability of the bondholder to take recourse against the issuer. A positive covenant creates an obligation for the issuer to perform an action.

The Written Agreement Between a Corporation and Its Bondholders Contains