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Question

Which are the asset-related covenants adopted by financial institutions while granting a loan?

(a) Maintenance of working capital position in terms of a minimum current ratio

(b) Prohibition on disposal of promoters' shareholding

(c) Restriction on creation of further charge on asset

(d)  Ban on sale of fixed assets without the lender's concurrence

Which one of the following options is most appropriate?

The correct answer is

(a), (c), (d)

The minimum current ratio protects working-capital assets; restrictions on further charges protect the lender’s security; and restrictions on fixed-asset sales preserve the asset base. These are (a), (c), and (d). Restricting disposal of promoters’ shares concerns ownership and control, not the borrower’s assets.

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