Loan covenants are used for which of the following reasons?a. To protect the lender from the borrower’s substantially weakening of the latter’s financial position.b. To protect the borrower from the lender’s calling the loan early.c. To protect the auditors from false information by the borrower.d. To protect shareholders from management taking on too much debt.

Q: Do some states allow creditors to engage in deception with the debtor to obtain the collateral if…

A: The term "creditors" refers to individuals or entities to whom money is owed by a debtor (the person…

Q: Business damages, as a result of financial fraud, directly impact the operations of any company.…

A: Fraud is an intentional act which is committed in order to defraud a group of people for the purpose…

Q: What is a contingency? Why are contingencies important to users of financial statements? What are…

A: When there is a scenario in which the conclusion cannot be predicted and which must be handled in…

Q: What type of concessions might a creditor grant the debtor in a troubled-debt situation?

A: Debt is the amount owed by the company for a particular period from the date of the company's…

Q: business

A: Company will windup at the end when borrowing are excessive and at that time all the assets and…

Q: Unsecured creditors: have rights to be paid amounts owed, but the rights may have to be enforced…

A: Correct option is 1. i.e unsecured creditors have rights to be paid amounts owed, but the rights may…

Q: Which of the following is an example of nonrecourse debt? (a) A personal loan secured by collateral…

A: A nonrecourse debt is where the borrower is liable only till its collateral, i.e the lender can only…

Q: Explain how serious regulatory lapses in the system is one of the difficulties associated with the…

A: The financial system is an system that facilitates the exchange of money and funds between the…

Q: balance-sheet mismatch that financial intermediaries

A: Financial intermediaries as the name suggest are the middlemen between two parties engaged in a…

Q: Which of the following best describes the tradeoff managers face concerning the usage of debt?…

A: Explanation The trade-off capital asset pricing model proposes that a company balances the risks and…

Q: Many types of debt including auto loans, student loans and credit debt are securitized. The…

A: Securitization is the procedure where an issuer designs a marketable financial instruments by…

Q: If a company has any debt covenants, those debt covenants need to be considered whenever that…

A: Debt Covenant: Debt covenants are limits that lenders (creditors, debt holders, investors) impose on…

Q: Business damages, as a result of financial fraud, directly impact the operations of any company.…

A: Fraud includes activities such as theft, corruption, conspiracy, bribery etc. Fraud can occur in any…

Q: What are the different ways to estimate bad debt? How does this affect net income? What does…

A: The company makes sales on cash and sales on account as well. The company generally makes sales on…

Q: The understatement of debt, whether due to error or fraud, is considered to be a major potential…

A: Understatement of debt: This occurs when an entity fails to completely disclose the debt it owes to…

Q: The severity of a recession can be magnified by credit market imperfections in which: there is…

A: Credit market imperfections refer to the situations where the assumptions of perfect competition,…

Q: How can bankers be spotting potential fraud among the loan granted

A: Bank loan means the loan given by the bank to the borrower. This loan can be provided for short term…

Q: A debt restructuring that involves a modification of terms and does not require court approval may…

A: A debt restructuring that involves a modification of terms and does not require court approval may…

Q: Accounting fraud is the intentional manipulation of financial statements to create a false…

A: Meaning of Accounting Fraud: Accounting fraud refers to intentional manipulation of financial…

Q: Positive covenants specify actions a borrowing company must take as part of the indenture. These…

A: The statement is False. Positive covenants, part of a loan's terms, do require the borrower to…

Q: With respect to Long-Term Debt, please describe the tests of controls and substantive procedures…

A: Auditors primary responsibility is to form an opinion on financial statements. To form an opinion on…

Q: Bonds can be an effective counterbalance in a portfolio heavily invested in stocks. True False

A: Bonds: It is a type of investment wherein the issuer of the bond promises the holder of the bond to…

Q: A debt amortization schedule prepared for each debt and equity is considered a good control. O True…

A: Debt Amortization Schedule: A loan amortisation schedule is a comprehensive table of periodic loan…

Characteristics of Bonds