The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to ________.

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The purpose of a restrictive debt covenant that prohibits the sale of accounts receivable is to prevent the company from selling current assets (accounts receivable) to raise cash to pay current obligations. This restriction protects the lender by ensuring that the company does not use its current assets to meet its current obligations, which reduces the risk of default on the loan. Restricting the firm's ability to sell accounts receivable ensures that the lender has a source of repayment if the firm gets into financial difficulty.

The Purpose of the Restrictive Debt Covenant That Prohibits the Sale