What is Short-Term Debt?

Short-term debt is the amount of a loan that is payable to the lender within one year. Other types of short-term debt include commercial paper, lines of credit, and lease obligations. 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.

Presentation of Short-Term Debt

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.