Loan covenants:
A)protect the borrower from lender interference in management.
B)are limited to "negative" provisions.
C)may limit discretionary cash outlays by borrowers.
D)are seldom enforced.
E)often result in the lender's bankruptcy.

Question

Quizplus · Accepted Answer

Loan covenants may limit discretionary cash outlays by borrowers to ensure that they have enough funds to make loan payments. This helps to protect the lender's investment and reduce the risk of default.

Loan Covenants