Business, Legal & Accounting Glossary
Money lent to a business for a fixed period, giving that business a commitment to pay interest for the period specified and to repay the loan at the end of the period Also called non-current liabilities information in the financial statements should show the commercial substance of the situation.
Long-term liabilities are liabilities with a future benefit of over one year. It refers to the company’s existing obligations or debts due after one year or the operating cycle, whichever is longer. They are shown on the right side of the balance sheet representing the sources of funds, which are generally used to finance capital assets. Long-term liabilities appear after total current liabilities and before owners’ equity. Examples of long-term liabilities are notes payable, mortgage payable, obligations under long-term capital leases, bonds payable, debentures, pension, and other post-employment benefit obligations. The values of many long-term liabilities represent the present value of the anticipated future cash outflows.
Decisions related to long-term debt are critical because how a company finances its long-term operations plays an important role in the company’s long-term financial viability. Too much debt may make the business risky while too much dependence on equity indicates inefficiency.
long-term debt, long-term liability, long-term commitments, long term liabilities, non-current liabilities
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This glossary post was last updated: 22nd November, 2021 | 0 Views.