A loan contract that requires the borrower to keep a certain percentage of its assets in cash is an example of ________.

Question

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This type of loan contract is an example of a restrictive covenant, which is a clause in a contract that restricts or limits certain actions of the borrower. In this case, the borrower must maintain a certain level of cash assets as a condition of the loan. This is a way for the lender to monitor and control the borrower's financial activities. Screening refers to the process of evaluating a potential borrower's creditworthiness, while monitoring involves ongoing supervision of the borrower's activities to ensure compliance with the loan agreement. A patent contract is not related to loans.

A Loan Contract That Requires the Borrower to Keep a Certain