Which of the following is most likely a benefit of
Which of the following is most likely a benefit of debt covenants for the borrower?
A.Reduction in the cost of borrowing.
B.Limitations on the company’s ability to pay dividends.
C.Restrictions on how the borrowed money may be invested.
参考解答
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2024-11-06 12:07:49
Ans:A.
Debt covenants are restrictions imposed by the lender on the borrower to protect the lender’s position.Debt covenants can reduce default risk and thus reduce borrowing costs.
B is incorrect.This is a disadvantage of using debt covenants for the borrower.
C is incorrect.This is a disadvantage of using debt covenants for the borrower.
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