Short-term debt

Short-term debt is the amount of a loan that is payable to the lender within one year. In the balance sheet, this amount is classified as a short-term liability. All other debts with longer repayment periods are classified as long-term debt on the balance sheet.

The balance in the short-term debt account is a major consideration when evaluating the liquidity of a business. If the proportion of this debt to the amount of liquid assets is too high, an analyst might conclude that the firm is facing a liquidity crisis and so will downgrade its credit rating.

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The Balance Sheet