1. When a debt covenant is violated, the related debt must be classified as current if it is probable that the borrower:
a. will not be able to cure the default within the next 12 months
b. will not be able to cure the default within the next 15 months
c. will be able to cure the default in the next 12 months
d. will be able to cure the default in the next 15 months
2. In a study of discretionary accounting accruals, it was found that abnormal accruals in the year prior to reporting covenant violations significantly:
a. decreased the company's current ratio but significantly increased the company's reported earnings
b. decreased the company's net worth
c. increased reported earnings and increased working capital
d. increased reported earnings and decreased working capital
3. A decrease in market-wide interest rates will result in a/an:
a. increase in the cost of equity capital
b. decrease in the cost of equity capital
c. increase in the cost of debt
d. decrease in the demand for fixed-rate bond investments