What is the Book Value of Debt?

The book value of debt is comprised of the following line items on an entity’s balance sheet:

Notes payable. Found in the current liabilities section of the balance sheet.
Current portion of long-term debt. Found in the current liabilities section of the balance sheet.
Long-term debt. Found in the long-term liabilities section of the balance sheet.

The following liability section of a balance sheet exhibit indicates where these debt items are located on the balance sheet.

What is Not Included in the Book Value of Debt

The book value of debt does not include accounts payable or accrued liabilities, since these obligations are not considered to be interest-bearing liabilities.

How the Book Value of Debt is Used

Investors and analysts use the book value of debt to assess a company's financial leverage and evaluate its debt-to-equity or debt-to-asset ratios. It also serves as a reference point in business valuations, particularly when estimating enterprise value or assessing solvency. Additionally, lenders may use it to gauge a company’s current debt obligations and capacity to take on additional borrowing.