Limiting the size of dividends paid is an example of a protective covenant.

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A protective covenant is a provision in a loan agreement that seeks to protect the lender by restricting the borrower's actions or by requiring certain actions to be taken. Limiting the size of dividends paid is an example of a protective covenant because it restricts the borrower's actions by limiting the amount of money that can be paid out to shareholders as dividends, which could otherwise reduce the company's ability to repay the loan.

Limiting the Size of Dividends Paid Is an Example of a Protective