The Grass is Greener Company borrows money from a bank. Part of the loan agreement requires Grass is Greener to maintain stockholders’ equity of at least 40% of assets or otherwise to pay a higher interest rate. This requirement is referred to as a:
A. loan covenant.
B. credit rating.
C. bond rating.
D. call feature.
Answer:A
The Grass is Greener Company borrows money from a bank. Part of the loan agreement requires Grass is Greener to maintain stockholders’ equity of at least 40% of assets or otherwise to pay a higher interest rate. This requirement is referred to as a:
A. loan covenant. B. credit rating. C. bond rating. D. call feature.