Question 13

Which of the following statements best describes debt covenants?

Group of answer choices

More than one of the other statements is correct.

A negative covenant may require the firm to provide audited financial statements to the lenders.

A positive covenant may prevent the firm from issuing large dividends.

None of the other statements is correct.

A negative covenant may prevent the firm from borrowing more money.

Question 14

Why might leasing be advantageous for both the lessor and the lessee?

Group of answer choices

None of the other statements is correct.

More than one of the other statements is correct.

If the cost of capital is lower for the lessee, then the lessee can share some of the lower cost of capital with the lessor in the form of higher lease payments.

If the lessor's tax rates are higher, the lessor can share some of its tax benefits with the lessee in the form of higher lease payments.

The lessee can take advantage of off balance sheet financing.