Debt contracts may contain accounting based covenants such as: maintain working capital levels, stay below a specified debt-equity ratio, and maintain an agreed times interest earned ratio.

1. Explain how each of these covenants help to generate the lenders trust such that they are willing to lend money to the company at a reasonable cost.
2. Do these covenants give lenders complete trust that their interest and principal will be paid? Explain.

Please explain as thoroughly as possible

Thank you