Test: CPA Financial Accounting and Reporting (FAR)

1.

The Mohawk Company borrows $5 million and is required to sign a debt covenant as a condition of taking out the loan. Which of the following is least likely to be required by the debt covenant?

The debt covenant may require Mohawk to uphold certain minimum or maximum ratios

The debt covenant may restrict Mohawk from operating certain business segments if they don't meet minimum profitability requirements

The debt covenant may restrict Mohawk from doing whatever it wants with the loan proceeds

The debt covenant may require Mohawk to maintain a certain amount of working capital

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