The Purpose of the Restrictive Debt Covenant That Prohibits the Sale

Multiple Choice

The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to

A) ensure that a cash shortage does not cause an inability to meet current obligations.
B) assure the lender that the borrowed funds are put to the use for which they were intended.
C) prevent liquidation of assets through large salary increases of key employees.
D) limit the amount of fixed-payment obligations.