The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to
A. assure the lender that the borrowed funds are put to the use for which they were intended.
B. limit the amount of fixed-payment obligations.
C. ensure that a cash shortage does not cause an inability to meet current obligations.
D. prevent liquidation of assets through large salary increases of key employees.
Answer:C
The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to
A. assure the lender that the borrowed funds are put to the use for which they were intended. B. limit the amount of fixed-payment obligations. C. ensure that a cash shortage does not cause an inability to meet current obligations. D. prevent liquidation of assets through large salary increases of key employees.