Lenders monitor financial statement data to ascertain whether borrowers are adhering to,or violating,loan covenants.

Question

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Lenders use financial statements to evaluate the financial health of borrowers and to ensure that they are complying with the terms of the loan agreement, including loan covenants. If borrowers violate these covenants, lenders may take corrective action or even declare the borrower in default.

Lenders Monitor Financial Statement Data to Ascertain Whether Borrowers Are