Reply to thread
Results 1 to 2 of 2

Thread: what is Short Term Debt?

  1. #1 You can automatically minimize the read posts in your account in the 'Forum Settings'
    Banned
    I am:
    ----
     
    PkPanda is a name known to all PkPanda is a name known to all PkPanda is a name known to all PkPanda is a name known to all PkPanda is a name known to all PkPanda is a name known to all PkPanda's Avatar
    Join Date
    Jan 2021
    Posts
    98
    Accumulated bonus
    11 USD (What is this?)
    Thanks
    36
    Thanked 638 Times in 82 Posts
    SubscribeSubscribe
    Subsribed 0

    Default what is Short Term Debt?

    HTML Code:
    [COLOR="black"]Short-term debt is debt of an organization or company with a maturity period of less than one year . In a company's balance sheet,[/COLOR]
    debt is a class of liabilities or obligations that the company must meet. This liability is divided into short-term and long-term debt, the difference is the maturity period, where if it is less than one year it is a short-term debt, while if it is more than one year it is a long-term debt.

    The term short-term debt is not only aimed at the true meaning of debt. In financial terms, if there is an obligation that must be paid by the company within the next one year, it will be classified as short-term debt. The following are the types of short-term liabilities of a company:

    See also: Wide range of InstaForex technical indicators.

    Accounts payable , companies borrow money for business capital or working capital, and must be paid along with interest, for example borrowing money from banks.
    Dividend payable , companies that earn profits and must share their profits with their investors, then this obligation becomes dividend payable.
    Income received in advance , this obligation is not in the form of payment of money, but in the form of goods or services. This happens when there are consumers who pay for goods/services while the goods purchased by consumers have not been given/shipped by the company.
    Tax liability . Companies must pay taxes to the tax agency.
    Accounts payable . Debts incurred due to the company's business activities or operations, for example debts to suppliers of raw materials that have not been paid. Another example is the payment of rent for a business place that has not been paid.
    Obligation to pay wages . Payment of employee salaries/wages are also usually classified as short-term debt.

    Try Forex indicators in MT4 with $ No Deposit Bonus now!

    Payment of long-term debts that are due . Long-term debt can turn into short-term debt if it happens that in the current period the long-term debt is due. For example, there is a long-term debt taken by the company in 2016 for 5 years, then in 2021, the debt will turn into short-term debt.

    There are short-term debt whose value can be estimated, some of which have not. For a certain value, for example, accounts payable, payment of salaries, installments of debt to banks. As for short-term debt, such as payment of taxes and dividends, the value usually cannot be estimated.

    Short-term debt can also be used as an indicator to assess the company's financial health. Company debt, especially short-term debt can assess the level of company liquidity. One of the liquidity indicators that can assess this is the current ratio .

    See also: Wide range of InstaForex technical indicators.

    Current ratiocalculated by comparing the amount of current assets to the amount of short-term debt. A current ratio value above 1 means that the company will be able to pay all its short-term debt, and it means that the company has good liquidity. While the current catio value is below 1, it means that the company's liquidity is bad because the company will not be able to pay its short-term debt. This means that the company is in a bad financial condition and has the potential to release their assets.

    For a short-term investor, the company's liquidity value is important, because mathematically, only companies that have a current ratio value above 1 have a probability of making a profit in the current period. Higher value of current ratio it will be even better, because it means that the company's liabilities are smaller when compared to the value of its assets.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


  2. 0 user say Thank You to PkPanda for this useful post.
  3. #2 You can automatically minimize the read posts in your account in the 'Forum Settings'
    My charts talk to me!
    I am:
    ----
     
    Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1 has a reputation beyond repute Hande1's Avatar
    Join Date
    Jul 2020
    Posts
    905
    Accumulated bonus
    415 USD (What is this?)
    Thanks
    916
    Thanked 4,595 Times in 868 Posts
    SubscribeSubscribe
    Subsribed 1
    This post is sponsored by a content payout program available to anyone to participate.
    The balance sheet has two sides, namely assets and liabilities. In this liability there is short-term debt, also known as current debt. Another term for short-term debt is current liabilities. In this liability section there are two broad categories, namely debt and equity. Short-term debt is part of the company's debt. The debt itself is divided into two categories, namely short-term debt and long-term debt. We will not discuss long-term debt, nor any other part of the balance sheet. But the focus of our discussion is on short-term debt only.

    Definition of Short-Term Debt

    Short-term debt is an obligation that must be paid by the company in a period of one year or less. So if a debt has a maximum maturity of 1 year then the debt is included in short-term debt. So what if the debt has a maturity of more than one year? The debt is included in long-term debt. Short-term debt is also known as current debt, because it is an obligation that must be paid immediately by the company. Usually this type of debt occurs due to transactions made by the company and the company's operating costs. Examples of short-term debt arising from company transactions, purchases of merchandise to be resold by the company. An example of short-term debt arising from the company's operations is salary payable.

    Types of Short-Term Debt

    See also: Invest in the most successful traders. More details.


    If we look at the balance sheet, there are about 7 types of short-term debt that we often encounter, including:
    1.Trade payables are payables arising from credit purchase transactions for goods that can be resold, or goods related to the company's production. This type of debt is usually a debt that has a very short maturity period. Generally, the maximum maturity period is 30 days, besides that, payments that are faster than a certain time can get discounts or purchase discounts. Accounts payable generally do not require collateral to obtain, and there are no complicated requirements to obtain.
    2.Notes payable are the company's debts to other parties that are reinforced by written promises. Usually this note payable is related to the purchase of goods made by the company. In contrast to trade payables which are generally not accompanied by a written promise, notes payable are accompanied by a written promise. Actually, these notes payable can be included in short-term debt, and can also be included in long-term debt. To determine whether the note payable is included in short-term or long-term debt, it can be seen in the terms of the payment term. If the maturity of the debt is less than 12 months, it is included in short-term debt, and if the maturity is more than 12 months, it is included in debt. long-term.
    Accrued costs are debts that arise as a result of costs that must be paid by the company because it is time to pay, but by the company the payment of these costs is postponed. 3.Common examples of these accrued costs are water, electricity, telephone charges. Because these costs when they become a burden on the company are not paid directly. These fees also have a grace period for payment.
    4.Taxes payable are company obligations arising from the imposition of taxes by the government. Tax payments have a time limit, and this period is not more than one year. That's why in the company's financial statements tax debt is included in short-term debt.
    5.Deferred income is the company's income received for services rendered to other parties, or on the sale of goods, but this income is received by the company before the service is performed by the company, or the goods have not been delivered by the company. This category of short-term debt does not need to be paid by the company in cash. The company simply performs these services, or sends goods purchased by consumers, the balance in the deferred income account will be reduced (lost).

    See also: Get a chance to win luxury car. Join now!

    Salary payables are debts that arise as a result of delayed payment of salaries of employees/workers. Employee salaries that have not been paid by the company will usually be paid by the company within a few days, so this salary debt is included in short-term debt.
    Dividend payable. Companies sometimes share their profits with shareholders. The profits that are distributed are called dividends. When it is decided that the company will give dividends to shareholders, the dividend money is not immediately given to shareholders, but has a period of payment or interval. this is what gives rise to dividends payable.
    Bank Loans are company debts to banks with a tenor of less than one year. If the bank loan has a tenor of more than one year, the bank loan is included in long-term debt.

    Characteristics of Short-Term Debt

    Sometimes it is difficult to distinguish between short-term debt and long-term debt. Because the same type of debt may fall into different debt categories. To make it easier to distinguish between short-term debt and long-term debt, we should know the characteristics of short-term debt, namely:

    See also: Invest in the most successful traders. More details.

    These loans have maturities of less than one year. Examples of accounts payable, nasa maturity of accounts payable only a few months.
    1.No interest is charged on the debt. Example Accounts payable, no interest is charged on the debt.
    No guarantee required. Short-term lending is generally based on trust, and occurs because of frequent business relationships, so no collateral is required. However, sometimes this type of debt can be through an oral agreement or through a written agreement.
    Usually the payment of debt at once, not in installments.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


  4. 0 user say Thank You to Hande1 for this useful post.
Reply to thread

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts