What is a debt covenant? Why do lenders include them in loan agreements? Why do borrowers agree

Question:

What is a debt covenant? Why do lenders include them in loan agreements? Why do borrowers agree to include covenants in loan agreements?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial Reporting and Analysis

ISBN: 978-0078025679

6th edition

Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon

See More Books

Question Posted: Sep 10, 2014 10:22 AM

See More Questions

What is a debt guarantee and how does the SBA back a small business loan?
What is a debt security?
What is a debt buyback? Why was a program of debt buybacks not sufficient to resolve the Debt Crisis?
As an employer, what are steps you can take to avoid discrimination litigation?
An ideal-gas mixture consists of 60 percent helium and 40 percent argon gases by mass. The mixture is now expanded isentropically in a turbine from 400oC and 1.2 MPa to a pressure of 200 kPa. The...
Discuss eldercide as a form of family violence, including its prevalence, perpetrators, and victims.
Hi Tech Corporation provides customers with access to the latest advancements in technology and software. Hi Tech replaces employee workstation computers every three years. Printers are replaced...
David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of...
3. You purchased a 3 year coupon bond one year ago. Its par value is $1,000 and coupon rate is 6%, paid annually. At the time you purchased the bond, its yield to maturity was 6.5%. Suppose you sell...
Melissa Young had always been encouraged by her accounting professor to apply her accounting skills as much as possible. When her uncle asked her to prepare his accounting records for a company he...
Microsoft develops, manufactures, licenses, sells, and supports a wide range of software products for personal computers (PCs) and servers; business and consumer productivity applications; software...
What are the advantages of loan agreements that contain covenants tied to accounting numbers? Are there any disadvantages? Explain.
f(x) = 3x 3 12x 2 + 6x 24 a. Use the factor theorem to show that (x 4) is a factor of f(x). b. Hence, show that 4 is the only real root of the equation f(x) = 0.
1. What is maritime law? 2. Why is it that Maritime Law is so important? 3. As per Law of the Sea, What do you mean by the following ? Internal Waters, Territorial Sea, Continental shelf, Contiguous...
If the volume of Puget Sound is 168 km3, and the inflow from the N. Pacific at Admiralty Inlet is about 2104 m3/sec, make a rough estimate of the residence time TPS of water in Puget Sound (in units...
An Admiralty Bond promises a payment of $50/year, forever. Assuming the first payment is expected one year from today and that an appropriate yield is 5%, what is a fair price for this bond?...
AN ACTIVITY WHERE A SUPPLIER MANAGES ITS OWN INVENTORIES AT THE BUYER'S SITE IS CALLED: a. EARLY SUPPLIER INVOLVEMENT SCHEDULING b. STRATEGIC INVENTORY PLANNING c. VENDOR MANAGED INVENTORY (VMI) d....
The Sugar Act, lowered the tax on molasses. What really angered the colonists was the establishment of the vice admiralty courts. Why?
Balance these equations for reactions in basic solution. (a) Fe 2 S 3 + H 2 O + O 2 Fe(OH) 3 + S (b) O 2 - + H 2 O OH - + O 2 (c) CrI 3 + H 2 O 2 CrO 4 2- + IO 4 - (d) Ag + CN - + O 2 + OH - ...
Saccharin is an artificial sweetener that is used in diet beverages. In order for it to be metabolized by the body, it must pass into cells. Below are shown the two forms of saccharin. Saccharin has...
Let $\left\{X_{n}ight\}_{n=1}^{\infty}$ be a sequence of independent random variables where $X_{n}$ has an $\operatorname{ExpONEntial}\left(\theta_{n}ight)$ distribution for all \(n \in...
What is a ratio? How do ratios help to alleviate the problem of size differences among firms?
What does each of the following categories of ratios attempt to measure? (a) Liquidity; (b) Long-term borrowing capacity; (c) Profitability. Name a group of users who might be interested in each...
Differentiate between absolute and percentage changes. Which is generally a better measure of change? Why?
How crucial is it to understand the many sorts of speech contexts on a daily basis? Give one specific example. Here are the types of speech context: 1. Public Communication 2. Small Group...
Enmebaragesi of Kish, Inc. has sales of $282,000, cost of goods sold of $206,000, depreciation of $4,200, and interest expense of $22,000. The tax rate is 30.8 percent. What is the times interest...
Inkishush and Company has a book value per share of $10.35, earnings per share of $2.23, and a price-earnings ratio of 19.4. What is the market-to-book ratio?

What is a debt covenant? Why do lenders include them in loan agreements? Why do borrowers agree

Question:

Step by Step Answer:

Debt covenants are restrictive provisions written into loan agreements by ...View the full answer

Financial Reporting and Analysis

Students also viewed these Accounting questions