Overview

ratio covenant


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A form of covenant in a loan agreement that includes conditions relating to such ratios as the gearing ratio and interest cover. Breaching such a covenant could indicate significant deterioration in the company’s business or a major change in its nature; this will usually empower the lender to request repayment of any of the loan then outstanding, and the loan then becomes null and void.

Subjects: Financial Institutions and Services — Accounting.


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