Bank Covenants

Bank Covenants are part of a contractual loan agreement entered into by a borrower with a bank, to keep the business within specified financial ratio limits.

Covenants are usually fixed in terms of:

Current Ratio
Quick Test
EBIT/Interest
Days Sales Outstanding
Debt Ratio

Sometimes additional ratios are required, such as:
ROTA
Inventory days
Receivables days

Covenants can be any financial ratio or value that the bank chooses to impose.