From the creditor's perspective,what is the purpose of loan covenants?
A) To assist government agencies in examining financial statements
B) To help to ensure a company will be able to repay the loan
C) To aid in forecasting future revenues and expenses
D) To help to determine the amount of money lent to a company

Question

Quizplus · Accepted Answer

Loan covenants are specific requirements that a borrower agrees to follow in order to obtain a loan. They are put in place to help ensure that the borrower will have the ability to repay the loan. This helps to reduce the risk for the creditor and increase their confidence in making the loan.

From the Creditor's Perspective,what Is the Purpose of Loan Covenants