A short term debt is primarily a debt, which needs to be paid off within one year. The short term is included in the current liabilities section of the balance sheets of companies. The short term debts are often bank loans that are taken by a variety of business organizations.
Uses of Debt
The debts have a lot of importance in the corporate world. The modern day business companies place a lot of importance on debts. They regard it as a crucial part of their business plans.
Definition of Short Term Debt
A short term debt is defined as a debt, which is supposed to be paid off on a specified date within a year.
Importance of Short Term Debts
The short term debts are regarded as really crucial for the business organizations as they are employed to assess the performance of companies, as well as its financial status.
Provided the liabilities of a company amount to a greater value than the assets, it is assumed to be not doing well.
The short term debts are also called current liabilities. The current liabilities are outstanding dues that need to be paid to the creditors, as well as the suppliers. The payments need to be made within a short span of time. The current liabilities are normally paid by the companies utilizing their assets.
The liabilities refer to the legal obligations of a company. Often the companies incur such liabilities during the course of their operations. The companies pay off these dues by way of money or other benefits.
The liabilities are an important part of the business of the company as they are often employed in order to make bigger payments, as well as execute business activities. The liabilities play an important role in increasing the efficacy of the business deals being undertaken by companies.
An example of the liabilities is the property tax owed by the home owners to the municipal governments.
Last Updated on : 9th July 2013