- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 47. Fundamentals of Credit Analysis
- Subject 4. Credit Analysis
CFA Practice Question
Which C would be the most effective way to prevent management from paying large dividends or undertaking stock buybacks well in excess of free cash flow?
A. Capacity
B. Collateral
C. Covenants
Explanation: Strong covenants can protect bondholders from the possibility of management taking such actions to enrich shareholders at the expense of bondholders.
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