A loan agreement may require that a company's current ratio not fall below a certain level and/or that the company's debt ratio may not rise above a threshold.

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It is common for loan agreements to include financial covenants that require the borrower to maintain specific financial ratios, such as a minimum current ratio or maximum debt ratio. These covenants help mitigate the lender's risk by ensuring the borrower's financial health and ability to repay the loan.

A Loan Agreement May Require That a Company's Current Ratio