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Long-term Debt: Definition and Meaning
Definition
Long-term debt is debt that is not expected to be due within the next year or normal operating cycle.
Why It Matters
Long-term debt may finance equipment, property, acquisitions, growth initiatives, or other long-lived investments. Businesses need to consider repayment schedules, interest costs, covenants, collateral, refinancing risk, and the relationship between debt obligations and future cash flow.
The portion of a loan due within the next year is often reported separately as a current liability.
Example
A five-year equipment loan may have a current portion due in the next 12 months and a remaining long-term portion due afterward.
Related Terms
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