Limitations the lender imposes on the borrower on the amount of dividends that can be paid, the level of salaries and bonuses that may be given to the borrower's employees, the total amount of indebtedness that can be assumed by the borrower, and investments in plant and equipment and acquisitions are called affirmative covenants.

Question

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These are examples of negative covenants, not affirmative covenants. Negative covenants restrict the borrower from doing certain things, while affirmative covenants require the borrower to perform certain actions.

Limitations the Lender Imposes on the Borrower on the Amount