Which of the following is not a common debt covenant restriction?
A)Maintenance of a minimum level of retained earnings before dividends can be paid.
B)Maintenance of a minimum working-capital ratio.
C)Specification of a maximum debt-equity ratio.
D)Specification of a minimum earnings per share.

Question

Quizplus · Accepted Answer

While maintenance of a minimum level of retained earnings, minimum working-capital ratio, and maximum debt-equity ratio are common debt covenant restrictions, specification of a minimum earnings per share is less common. This is because earnings per share can be influenced by a variety of factors beyond the control of the borrower, such as changes in accounting rules or fluctuations in the economy.

Which of the Following Is Not a Common Debt Covenant