imported>Doug Williamson |
imported>Doug Williamson |
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| ''Credit risk - liquidity - financial ratios - documentation. ''
| | The same as PESTLE analysis. |
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| Debt to EBITDA is measure of an organisation's medium and longer term debt servicing capacity.
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| The lower the ratio, the greater the organisation's ability to service and repay its debt. | |
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| Therefore, the lower its credit risk.
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| The ratio is calculated by dividing the organisation's debt by its EBITDA.
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| Borrowing documentation may contain financial covenants, requiring the borrower to keep its debt to EBITDA ratio below the convenanted figure.
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| :<span style="color:#4B0082">''Covenant test''</span>
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| :G Group's net debt is EUR 350m and its EBITDA is EUR 100m.
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| :G Group's maximum covenanted net debt to EBITDA ratio is 3 times.
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| :Is G Group within its financial convenant?
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| :Net debt to EBITDA ratio
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| : = EUR 350m / EUR 100m
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| : = 3.5 times.
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| :This is greater than the covenanted maximum of 3 times.
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| :G Group is in breach of its covenant.
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| == See also == | | == See also == |
| * [[Breach of covenant]] | | * [[PESTLE analysis]] |
| * [[Condition]]
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| * [[Contract]]
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| * [[Covenant]]
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| * [[Credit risk]]
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| * [[Cross acceleration]]
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| * [[Default]]
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| * [[EBITDA]]
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| * [[Event of default]]
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| * [[Financial covenant]]
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| * [[Financial ratio]]
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| * [[Frozen GAAP]]
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| * [[Headroom]]
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| * [[Interest cover]]
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| * [[Interest rate risk]]
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| * [[Liquidity]]
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| * [[Loan agreement]]
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| * [[Loan to value]]
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| * [[Representations and warranties]]
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| * [[Risk]]
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| * [[Solvency]]
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| * [[Tangible net worth]]
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| * [[Translation risk]]
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| * [[Waiver]]
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| * [[Working capital]]
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| [[Category:Accounting,_tax_and_regulation]]
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| [[Category:The_business_context]]
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| [[Category:Identify_and_assess_risks]]
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| [[Category:Manage_risks]]
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| [[Category:Risk_frameworks]]
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| [[Category:Risk_reporting]]
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