Short Term Debts Definition
Short Term Debts are any borrowings or loans due within the next twelve months.
Short Term Debts comprise of any borrowing or loan repayments a company is obliged to pay within the next twelve months. They are a balance sheet item and are a component of a companys Current Liabilities, note that any payments due out of the tweleve month period are instead classed as Long-term Debt.
There are two types of Short Term Debt a company may have, which are:
The amount of Short Term Debt for a company will ascertain its level of liquidity. Where the amount of Short Term Debt does not correlate well to the amount current assets, this may be an idicator of poor financial health and that a comapny may struggle with its payment obligations.