CFA Practice Question
Which of the following is not an example of an affirmative (positive) covenant?
A. Requirement to furnish bondholders with a copy of the firm's annual account records
B. Requirement to maintain a minimum level of net worth and a minimum level of working capital
C. Requirement to limit dividends to net income
User Contributed Comments 6
| User | Comment |
|---|---|
| KD101 | Copy of my account doesn't help you revover your money back - It helps you see what is going on. On the other hand, by restricting dividends to common shareholders, I may be left with more money |
| shawn | what are you talking about? |
| G3cc0 | if divs are limited to ni, the case may arise when bondholders don't get paid. that's a negative covenant. |
| sheenalim | Requirement to furnish bondholders with a copy of the firm's annual accounts. why is this a positive covenant? |
| copus | it is a positive covenant in that involves the positive act of presenting the companies financials. The question does not stipulate if the company is public (which would make this publication obligatory). Assuming that the company is a private company, this would most certainly be a positve covenant. |
| ashish100 | shawn lol |