The Purpose of the Debt Covenant That Requires Maintaining a Minimum

Multiple Choice

The purpose of the debt covenant that requires maintaining a minimum level of net working capital is to ________.

A) protect the lender by controlling the risk and marketability of the borrower's security investment alternatives
B) limit the amount of fixed-payment obligations
C) ensure a cash shortage does not cause an inability to meet current obligations
D) limit the annual cash dividends paid by the firm