Long-term liability

Definition

Long-term liabilities are financial obligations of a company that are due more than one year in the future. These liabilities often include bonds payable, long-term loans, and lease obligations.

5 Must Know Facts For Your Next Test

1. Long-term liabilities are reported on the balance sheet under non-current liabilities.
2. They affect a company's liquidity and solvency ratios, which are used to assess financial health.
3. Interest expense on long-term liabilities is reported on the income statement.
4. The pricing of long-term liabilities can be influenced by market interest rates and the creditworthiness of the borrower.
5. Companies may use amortization schedules to manage payments for their long-term debt.

Review Questions

• Where are long-term liabilities reported on the financial statements?
• How do long-term liabilities impact a company's liquidity ratios?
• What factors influence the pricing of long-term liabilities?

Related terms

Current Liabilities: Financial obligations due within one year.

Solvency Ratio: A measure used to evaluate a company's ability to meet its long-term debt obligations.

Amortization Schedule: A table detailing each periodic payment on an amortizing loan, showing the amounts applied to principal and interest.