The Purpose of the Debt Covenant That Prohibits Borrowers from Entering

Multiple Choice

The purpose of the debt covenant that prohibits borrowers from entering into certain types of leases is to ________.

A) protect the lender by controlling the risk and marketability of the borrower's security investments 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