Debt Covenant Compliance

Question 1

What is the debt covenant intended to protect

Answer 1

It is intended to protect the lending institution

Question 2

When a company is obligated to pay a specified amount to supplier even if it does not take delivery of goods how is this reported?

Answer 2

It is not reported on the B/S, however it is disclosed in the notes.
Note: this is called an UNCONDITIONAL PURCHASE COMMITTMENT