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How do accounting accrual adjustments affect covenants that require minimums for retained earn-ings or for certain...

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Accounting

How do accounting accrual adjustments affect covenants thatrequire minimums for retained earn-ings or for certain ratios suchas the current ratio? Are those effects permanent? b. How do realoperating changes affect covenants that require minimums forretained earnings or for certain ratios such as the current ratio?Are those effects permanent? c. What consequences might arise ifthe company focuses on managing reported numbers to avoid violatingdebt covenants? What parties are affected by such schemes?

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The accounts are prepared based on accrual system of accounting Hence the financial data is prone to deviate a little than the actuals as the financial statements are prepared based on some    See Answer
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