From the course: Excel for Finance: Building a Three-Statement Operating Model

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Model the leverage ratio

Model the leverage ratio - Microsoft Excel Tutorial

From the course: Excel for Finance: Building a Three-Statement Operating Model

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Model the leverage ratio

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- [Instructor] All right, so now we're ready to move on to the reason we are all here. To model out the financial covenants of the company and get back to the CFO on his request of are we going to be in covenant compliance or not if we take on this large capital project. I like to think of covenant compliance as basically a financial health check of the company. So just like you go to the doctor and get some of your vitals taken, the covenants are a way to keep the vitals of the business in check. Namely, we're going to do two for this course. One is called the leverage ratio. The other is called the fixed charge coverage ratio. So let's start with the leverage ratio. Just going to copy the header here and paste it. And what I like about the covenants is that we're just going to be referencing work that we've already done. We don't have to build anything new so that's kind of a relief. So leverage ratio is just a…

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