The written agreement between a corporation and its bondholders contains a limitation on the dividends that the corporation can pay. This limitation is:
A) A non-recourse covenant
B) A recourse covenant
C) A positive covenant
D) A negative covenant

Question

Quizplus · Accepted Answer

A limitation on dividends is a type of restriction that prevents the corporation from taking certain actions, in this case paying dividends to bondholders. Therefore, it is a negative covenant.

The Written Agreement Between a Corporation and Its Bondholders Contains