ACC 557 DQ 2 Debt Covenants

" Please respond to the following:

Based on your research conducted in the e-Activity, assess the key components of the loan covenant typically used in business loans. Indicate the necessity of each covenant and the likelihood that default will be prevented. Suggest whether or not you agree or disagree with lenders using the covenant approach for protection. Provide a rationale for your position.

Create an alternative strategy for lenders to use to protect themselves for loan default. Indicate how this approach would be more desirable than debt covenants. Provide support for your strategy.

Answer:

a.

covenants are restrictions based on specific balance sheet, income statement or cash flow items. They may be the largest, most commonly used...