The requirement that the issuer of a bond maintain a current ratio of 2.0 or above is beset described as:
A) a debenture.
B) a negative covenant.
C) an affirmative covenant.

Question

Quizplus · Accepted Answer

An affirmative covenant is a type of promise or contract that requires a party to adhere to certain terms. In the context of bonds, an affirmative covenant is a promise by the issuer to maintain certain financial ratios or to undertake specific actions, such as maintaining a current ratio of 2.0 or above, to protect the interests of the bondholders. This contrasts with a negative covenant, which restricts the issuer from certain actions, and a debenture, which is a type of debt instrument that is not secured by physical assets or collateral.

The Requirement That the Issuer of a Bond Maintain a Current