Debt contracts will:

Question

Quizplus · Accepted Answer

Debt contracts may occasionally restrict accounting techniques used by a firm to ensure proper recoupment of debts. The restrictions may be outlined in the contract to minimize risk to the lender, such as preventing the firm from using aggressive accounting methods that may understate liabilities or overstate profits. However, it is not typical for debt contracts to stipulate accounting methods or encourage claim dilution, and while some discretionary ability may be granted to management, it is usually limited.

Debt Contracts Will