Long Term Debt

Long-term liabilities, also known as non-current liabilities or long-term debt, are sums of money owed to a third party, such as a bank, that are due after a year. Excessive long-term debt or noncurrent liabilities are viewed as signs that the company is not self-sufficient and is reliant on outside providers.

One advantage of long-term debt is that the interest paid on the loan can be deducted from your taxes. While the interest rates on long-term debt are higher than those on short-term debt, the longer repayment period is advantageous for repaying the principal amount.

Bank loans, mortgages, bonds, debentures, and other long-term debts are examples. On a company’s balance sheets, all of these different types of debts are ranked in order of repayment priority.

Long-term debts are moved to the current liabilities section of the balance sheet when their maturity date is less than 12 months.

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