The interest coverage ratio (sometimes called times interest earned TIE) is a debt and profitability ratio used to determine how easily a company can pay interest on outstanding debt. The ratio is…
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Liquidity is a company’s ability to convert assets to cash or acquire cash—through a loan or money in the bank—to pay its short-term obligations or liabilities.
A letter of credit (credit letter) is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the right amount….
Dilution of receivables denotes the variance between the gross amount of invoices and the cash collected for such invoices. Factors such as bad debt write-offs, warranty returns, invoicing errors, trade…
Distress cost refers to the expense that an organization in financial distress faces beyond the cost of doing business, such as a higher cost of capital. If additional capital is…
Financial distress is a term in corporate finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. This is generally due to…
Debtor-in-possession financing or DIP financing is a unique form of financing provided for companies in financial distress, typically during restructuring under corporate bankruptcy law (such as Chapter 11 bankruptcy in the US or CCAA…
Covenants are promises or stipulations that are part of written agreements, frequently relating to real, tangible property such as a vehicle. If one of the parties involved in the agreement…