What Is a Covenant? In its broadest sense, a covenant is a promise, agreement, or contract between two parties. As part of the covenant, the two parties agree that certain activities will or will not be carried out. Covenants in finance most often relate to terms in a financial contract, such as a loan document
What Is a Covenant-Lite Loan? A covenant-lite loan is a type of financing that is issued with fewer restrictions on the borrower and fewer protections for the lender. By contrast, traditional loans generally have protective covenants built into the contract for the safety of the lender, including financial maintenance tests that measure the debt-service capabilities of
What is Covenant Not To Execute A covenant not to execute is a lawsuit agreement in which the plaintiff agrees not to execute a judgment against the defendant. A covenant not to execute in an insurance claim lawsuit is typically provided by a plaintiff who wants to seek a portion of the overall damages from the
What Is a Coverage Ratio? A coverage ratio, broadly, is a metric intended to measure a company’s ability to service its debt and meet its financial obligations, such as interest payments or dividends. The higher the coverage ratio, the easier it should be to make interest payments on its debt or pay dividends. The trend
What is a Coverage Trigger? A coverage trigger is an event that must occur in order for a liability policy to apply to a loss. Coverage triggers are outlined in the policy language, and courts will use different legal theories pertaining to triggers to determine whether policy coverage applies. Key Takeaways A coverage trigger is outlined
What Is a Coverdell Education Savings Account (ESA)? A Coverdell Education Savings Account is a tax-deferred trust account created by the U.S. government to assist families in funding educational expenses for beneficiaries who must be under the age of 18 when the account is established. The age restriction may be waived for special needs beneficiaries.
What Is the Cost Approach? The cost approach is a real estate valuation method that estimates the price a buyer should pay for a piece of property is equal the cost to build an equivalent building. In the cost approach, the property’s value is equal to the cost of land, plus total costs of construction
What Is a Cost-Benefit Analysis? A cost-benefit analysis is a systematic process that businesses use to analyze which decisions to make and which to forgo. The cost-benefit analyst sums the potential rewards expected from a situation or action and then subtracts the total costs associated with taking that action. Some consultants or analysts also build models to
What Is a Cost Center? A cost center is a department or function within an organization that does not directly add to profit but still costs the organization money to operate. Cost centers only contribute to a company’s profitability indirectly, unlike a profit center, which contributes to profitability directly through its actions. Managers of cost
What Is Cost Control? Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process. A business owner compares the company’s actual financial results with the budgeted expectations, and if actual costs are higher than planned, management has the information it needs to take action.
