What Are Noncurrent Liabilities?

Noncurrent liabilities, also called 澳洲幸运5官方开奖结果体彩网:long-term liabilities or 澳洲幸运5官方开奖结果体彩网:long-term debts, are long-term financi𝓀al obligations listed on a company’s balance sheet. These liabilities have obligations that become due beyond 12 months in the future, as opposed to current liabilities, which are short-term debts with maturity dates within the following 12-month period.

Understanding Noncurrent Liabilities

Noncurrent liabilities are compared to 澳洲幸运5官方开奖结果体彩网:cash flow, to see if a company will be able to meet its financial obligations in the long term. While lenders are primarily concerned with short-term 澳洲幸运5官方开奖结果体彩网:liquidity and the amount of 澳洲幸运5官方开奖结果体彩网:current liabilities, long-term investors use noncurrent liabilities to gauge whether a company is using excessive leverage. The more stable a company’s cash flows, the more debt it can support without increasing its default risk.

Investors and creditors use numerous financial ratios to assess liquidity risk and leverage. The debt ratio compares a company’s total debt to total assets, to provide a general idea of how leveraged it is. The lower the percentage, the less leverage a company is using and the stronger its equity position. The higher the ratio, the more financial risk a company is taking on. Other variants are the 澳洲幸运5官方开奖结果体彩网:long-term debt-to-total assets ratio and the 澳洲幸运5官方开奖结果体彩网:long-te🐠rm debt-to-capitalization ratio, which divides noncurrent l🎀iabilities by the amount of capital available.

Analysts also use coverage ratios to assess a company’s financial health, including the cash flow-to-debt and the 澳洲幸运5官方开奖结果体彩网:interest coverage ratio. The 澳洲幸运5官方开奖结果体彩网:cash flow-to-debt ratio determines how long it would take a company to repay its debt if it devoted all of its cash flow to debt repayment. The interest coverage ratio, which is calculated by dividing a company’s 澳洲幸运5官方开奖结果体彩网:earnings before interest and taxes🔯 (EBIT) by its debt interest payments for the same period, gauges whether enough income is being generated to cover interest payments. To assess short-term liquidity risk, analysts look at 澳洲幸运5官方开奖结果体彩网:liquidity ratios like ♚the cur🅷rent ratio, the quick ratio, and the acid test ratio.

Examples of Noncurrent Liabilities

Noncurrent liabilities include 澳洲幸运5官方开奖结果体彩网:debentures, long-term loans, bonds payable, 澳洲幸运5官方开奖结果体彩网:deferred tax liabilities, long-term lease obligations, and pension benefit obligations. The portion of a bond liability that will not be paid within the upcoming year is classified as a noncurrent liability. Warranties covering more than a one-year period are also recorded as noncurrent liabilities. Other examples include 澳洲幸运5官方开奖结果体彩网:deferred compensation, 澳洲幸运5官方开奖结果体彩网:deferred revenue, and certain healthcare liabilities.

Mortgages, car payments, or other loans for machinery, equipment, or land are all long-term debts, except for the payments to be made in the subsequent 12 months, which are classified as the 澳洲幸运5官方开奖结果体彩网:current portion of long-term debt. Debt that is due within 12 months may also be♛ reported as a noncur🅷rent liability if there is an intent to refinance this debt with a financial arrangement in the process to restructure the obligation to a noncurrent nature.

The Bottom Line

Noncurrent liabilities are long-term financial obligations listed on a company’s 澳洲幸运5官方开奖结果体彩网:balance sheet. These liabilities, also called long-term liabilities or long-term debts, have obligations that become due beyond 12 months in the future.