Introduction

• Purpose of financial covenants Accounting fundamentals
• how balance sheets, income statements and cash flow statements interact GAAP
• International Financial Reporting Standards (IFRS)

EBIT and EBITDA

• Discontinued operations
• Associates and joint ventures
• Exceptional/unusual items
• Pension costs
• Financial instruments
• Depreciation, amortisation and impairment

Interest cover

• Finance costs/interest payable
• Senior interest payable

Leverage/gearing

• Borrowings and financial indebtedness
• Net borrowings/EBITDA
• Debt/equity

Cash flow measures

• Differences between profit and cash flow
• Adjusting EBITDA
• Debt service and debt service cover

Tangible net worth

• Adjustments to balance sheet numbers