Category: Debt

What happens if you default on the Debt?

When business secures debt, there are legal obligations between the parties. If the business does not  fulfil those obligations, for example, making timely payments, the funder can seek legal remedy. The funder may repossess assets related to debt or file for liquidation of the business  

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What is current & long term Debt?

Current & Long Term Debt Current portion of long term debt: amount payable in the next financial year (following 12 months) Long term debt = Total debt – current portion per (1) Business must in a position to settle the current portion of the debt

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What is Debt=Equity Ratio?

Debt-Equity Ratio Ratio: Total Debt / Total Equity = % The higher the debt-equity ratio, the higher the risk of the business Ratio rises/falls if debt is increased /decreased or equity decreased/increased

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What is the difference between a Debt and Liability?

Debt versus Liability A provider lends an amount to the business & there is obligation to repay the debt Liability – ALL obligations, something owed to someone Examples of Liabilities: Accrued expenses Trade creditors  Generally debt has interest, liabilities may or may not have interest.

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What is Debt?

Debt A provider (e.g bank) lends an amount to the business The business has an obligation to repay the amount borrowed (debt) Amount borrowed is called the principal amount.

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