1. A financial covenant would stipulate all of the following EXCEPT:
a. financial statements must be preparted in accordance with GAAP
b. specific levels of preformance to be met
c. which accounting methods are to be used
d. conditions that must be met
2. The section of a loan agreement that describes circumstances in which the creditor obtains additional rights is called the ______section.
a. events of compliance
b. certificate of compliance
c. events of termination
d. events of default
3. A study examining how incentives arising out of debt contracts affect manager's accounting choices found that the most common violations of accounting-based covenants occured with:
a. net worth and working captial restrictions
b. mergers and acquisitions restrictions
c. leverarged buyout restrictions
d. debt restructures