Explain the difference between affirmative and negative debt covenants and provide two examples of each.

Affirmative covenants describe actions that the borrower must take while negative covenants describe actions that the borrower may be limited in,or restricted from,taking.Examples of affirmative covenants include:using the loan for the agreed-upon purpose (i.e.,not substituting a more risky investment in place of the original investment the loan was sought for);having the company's financial statements audited by an independent accounting firm;providing those statements to the lender on a timely basis,complying with all laws and regulations (e.g.,environmental regulations);allowing the lender to inspect the borrower's financial records or physical assets;and maintaining insurance on assets and key employees.Examples of negative covenants include:limits on total debt,capital expenditures,loans and advances to affiliated companies,cash dividends,share repurchases,mergers,and asset sales while the loan is outstanding.