Creating Covenants - Defining Covenants

After an Item is created, Covenants can then be attached to it. As seen on this screen, when the user creates a new covenant, they define the following type of elements:

• Category – Assigns the Covenant to a specific category (Profitability, Liquidity, Cash Flow Coverage, Leverage, etc).
• Covenant – The Covenant to be tracked (Minimum EBITDA, Minimum Current Ratio, Minimum Interest Coverage, Maximum Debt-to-Equity, etc).
• Condition – The condition to be tested in the Covenant (Equal, Max, Min).
• Required Value – The value of the Covenant (current ratio cannot be less than 1.25). In addition, true/false Covenants can also be tracked (no consecutive quarterly losses).
• From/To Dates – The time period over which this Covenant is being monitored. By default, this default to the From/To Date for the associated Item, but the user can change the time period for each Covenant if necessary.
• Standard Definition – This field displays the standard definition for a ratio covenant.
• Custom – If the user selects a standard Covenant (i.e., Current Ratio), but the definition is unique for the counterparty, the user can enter the customer definition (i.e., Current Assets less Intercompany Receivables divided by Current Liabilities).