Long-Term Debt & Capital Lease Obligation
View All TermsLong-Term Debt is the debt due more than 12 months in the future. The debt can be owed to banks or bondholders. Some companies issue bonds to investors and pay interest on the bonds.
The interest paid on companies™ debt is reflected in the income statement as interest expense. If a company has too much debt and it cannot serve the interest payment on the debt or repay the matured debt, the company risks bankruptcy. Peter Lynch famously said: A company that does not have debt cannot go bankrupt.
A company™s long term debt may have different dates of maturity and interest rates, depending on the terms.
Usually a company issues long term debt to pay for its capital expenditures. Borrowing allows the company to do things that otherwise cannot be done with only the capital it has. But debt can be risky.
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