The capital impairment restrictions are established to ________.
A) reduce dividends equal to or below the current earnings level
B) constrain the firm to paying dividends which do not require additional borrowing
C) provide sufficient safety to equity holders
D) provide a sufficient equity base to protect creditors' claims

Question

Quizplus · Accepted Answer

Capital impairment restrictions are established to provide a sufficient equity base to protect creditors' claims. This means that the restrictions ensure that a company maintains a minimum level of equity to absorb any losses and protect the interests of creditors in the event of the company's insolvency.

The Capital Impairment Restrictions Are Established to ________