Which of the following is NOT an example of a positive debt covenant?
A) The company has to maintain a minimum level of working capital.
B) The company is restricted from doing mergers and acquisitions.
C) The company has to supply periodic cash flow statements to the lender.
D) The company has to supply annual audited statements to the lender.

Question

Quizplus · Accepted Answer

Restriction on mergers and acquisitions is a negative debt covenant as it limits the company's growth and expansion opportunities. A positive debt covenant would be something that ensures the financial health of the company, such as maintaining a minimum level of working capital, supplying cash flow statements, and providing audited statements to the lender.

Which of the Following Is NOT an Example of a Positive