Affirmative Covenant

AAA

DEFINITION of 'Affirmative Covenant'

A type of promise or contract which requires a party to do something. For example, a bond covenant that provides that the issuer will maintain adequate levels of insurance or deliver audited financial statements is an affirmative covenant.

INVESTOPEDIA EXPLAINS 'Affirmative Covenant'

Affirmative (or positive) covenants can be compared to restrictive (or negative) covenants, which require a party not to do something, such as sell certain assets. In bond agreements, both affirmative and restrictive covenants are used to protect the interests of both issuer and bondholder.

RELATED TERMS
  1. Running With The Land

    The rights and covenants in a real estate deed that remain with ...
  2. Acceleration Clause

    A contract provision that allows a lender to require a borrower ...
  3. Restrictive Covenant

    Any type of agreement that requires the buyer to either take ...
  4. Negative Pledge Clause

    A negative covenant in an indenture stating that the corporation ...
  5. Negative Covenant

    A bond covenant preventing certain activities, unless agreed ...
  6. Debt Limitation

    A bond covenant that limits or restricts any additional debt ...
RELATED FAQS
  1. How much of the profitability in the Internet sector is concentrated in the few major ...

    Outside of any limiting, narrow interpretations concerning what constitutes the Internet sector, there is very little industry ... Read Full Answer >>
  2. What is the difference between consumer surplus and economic surplus?

    The consumer surplus is the difference between the highest price a consumer is willing to pay and the actual market price ... Read Full Answer >>
  3. What techniques are most useful for hedging exposure to the banking sector?

    The banking sector moves in the same direction as the broader market, but its volatility is much lower. The sector's stability ... Read Full Answer >>
  4. How is accounting in the United States different from international accounting?

    Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, ... Read Full Answer >>
  5. How important are seasonal trends in the automotive sector?

    The automotive industry has some definite seasonal trends, with peak demand occurring in the spring and fall, and lowest ... Read Full Answer >>
  6. How do I find the information needed for input into the Dividend Discount Model (DDM)?

    Analysts and investors should utilize a company’s financial statements, stock information websites and any number of analysis ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  3. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  4. Economics

    What is Adverse Selection?

    Adverse selection occurs when one party in a transaction has more information than the other, especially in insurance and finance-related activities.
  5. Economics

    Explaining Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent.
  6. Economics

    What is a Capital Account?

    Capital account is an economic term that refers to the net change in investment and asset ownership for a nation.
  7. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  8. Fundamental Analysis

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  9. Economics

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  10. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center