CORPORATE ACCOUNTING RATIO ANALYSIS 2022

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Authors Note:

CORPORATE ACCOUNTING
1
Contents
Debt covenant:.................................................................................................................................2
Ratio analysis:..................................................................................................................................5
Observation:.....................................................................................................................................6
References:......................................................................................................................................7

CORPORATE ACCOUNTING
2
Debt covenant:
Debt covenants can be defined as agreement between a creditor and a company that
requires the latter to maintain threshold limits for certain financial ratios to ensure that the risk of
default in repayment of debt is minimum. The company is expected to not breach the threshold
limit for such ratios to continue availing the benefits of borrowing facility under the agreement.
Breaching such threshold limits in financial ratios would indicate a significant change in the vital
component of the company and its ability to repay the loan.
In case of Yellow Brick Road Holding Limited (YBR) the impact of continuous impairment of
intangible assets on the financial ratios shall be assessed before commenting on the company’s
compliance with debt covenants. The balance sheet below contains the amount of intangible
assets along with other assets and liabilities over the last five years. Using the data below let us
first calculate certain financial ratios over these five years period to assess the changes in these
financial ratios before commenting on the impact on debt covenant of the organization.
BALANCE SHEET OF YELLOW BRICK ROAD HOLDINGS LTD
(ALL AMOUNTS ARE IN AUD
MILLIONS)
2014-
06
2015-
06
2016-
06
2017-
06
2018-
06
Assets
Cash 1
2.00
1
1.00 7.00 5.00 5.00
Accounts Receivables 5 7 7 8