Long Term Debt

Long-term liabilities, also called noncurrent liabilities or long-term debt, is the money that a company owes to a third party, say a bank, and are due after a year. Excessive long-term debt or noncurrent liabilities is seen as an indicator that the company is not self-sufficient and is dependent on external providers.

One of the advantages of long-term debt is that the interest paid for the loan can be included in the tax deductibles. While the interest rates for long-term debt are higher compared to that of short-term debt, the longer duration is beneficial to repay the principal amount.

Examples for long-term debts include bank loans, mortgages, bonds, debentures, etc. All these different types of debts are ranked in the order of their repayment priority on the balance sheets of a company.

When the due date of long-term debts comes under 12 months, they’re moved to the current liabilities section of the balance sheet.

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