Ratios are a major output of the financial model. They are driven off the assumptions and the inputs that we already have in the model, which have been turned into calculations, calculations of cash flow, calculations of debt service. All the ratios are doing is pulling these numbers together into a useful measure that is used for reporting to the lenders and is used by the lenders to control their lending position and their credit risk. So we can use the figures we already have in the model and they will update automatically as any of the inputs change.

The issue that we have with modeling ratios is that there is no standard prescribed way of calculating ratios. Every bank does it slightly differently, even within the same bank. Different people calculate the ratios differently. That's why it's important that we set out the workings of our calculations so we can see what has been included and what hasn't been included in each line of the calculated amounts. So we show the figures that we've used, the resulting ratio, and very importantly, for each type of ratio, what is the worst point in the project. And we do that by calculating the ratio for every period across the model, and then either using a max function in Excel or a min function in Excel, depending on the sort of ratio that it is. If it was, for example, a debt service cover ratio, the debt service cover ratio from the lender's point of view has a minimum value in its covenant, and the lender would be worried about it being too low. So what we would try and calculate is the minimum value across the loan life for a ratio like loan to value, the higher that ratio is, the more exposed the lender is. So therefore the danger would be in the ratio being too high. We would do a max calculation across all of the years calculating the LTV loan to value each time, and then saying, at what point does it reach its highest level? We can also use conditional formatting in Excel to show not just the lowest value, but any values in any years that are lower than the level prescribed in the loan document. So whenever there is a breach of covenant, for example, paint the cell with the number in red, for example, we also need to use our intelligence to work out well when is an appropriate time to calculate the ratio? For example, a debt service cover ratio really only gives us meaningful information if we're in the operating period where we have some operating cash flow prior to that. During a construction period, The debt service cover ratio is not a meaningful number. So it is a good idea to have a consistent formula to say, if we are in a construction period, set the ratio to a blank. Otherwise, do the ratio, cash flow, divide by debt service, for example.