Which of the following is an example of an affirmative covenant?
A) The issuing company must not issue additional debt without approval of the lender.
B) The issuing company agrees to timely payment of interest and repayment of principal.
C) The issuing company must not issue any additional debt with existing assets as collateral.
D) The issuing company must not pay dividends to shareholders if the company experiences a net loss.

Question

Quizplus · Accepted Answer

Affirmative covenants are promises or agreements that require a borrower to perform specific actions. Option B, where the issuing company agrees to timely payment of interest and repayment of principal, is an example of an affirmative covenant because it requires the company to actively ensure that payments are made as agreed.

Which of the Following Is an Example of an Affirmative