Current portion of long-term debt CPLTD refers to the section of a company's balance sheet that records the total amount of long-term debt that must be paid within the current year. When reading a company's balance sheet, creditors and investors use the current portion of long-term debt CPLTD figure to determine if a company has sufficient liquidity to pay off its short-term obligations.
Interested parties compare this amount to the company's current cash and cash equivalents to measure whether the company is actually able to make its payments.
A company with a high number in its CPLTD and a relatively small cash position has a higher risk of default, or not paying back its debts on time; as a result, lenders may decide not to offer the company more credit, and investors may sell their shares. Businesses classify their debts, also known as liabilities, as current or long term. Current liabilities are those a company incurs and pays within the current year, such as rent payments, outstanding invoices to vendors, payroll costs, utility bills and other operating expenses.
Long-term liabilities include loans or other financial obligations that have a repayment schedule lasting over a year. Eventually, as the payments on long-term debts come due, these debts become current debts, and the company's accountant records them as the CPLTD. If a business wants to keep its debts classified as long term, it can roll forward its debts into loans with balloon payments or instruments with longer maturity dates.
However, to avoid recording this amount as current liabilities on its balance sheet, the business can take out a loan with a lower interest rate and a balloon payment due in two years. For example, if a company breaks a covenant in its loan, the lender may reserve the right to call the entire loan due. At the beginning of each tax year, the company's accountant moves the portion of the loan due that year to the current liabilities section of the company's balance sheet.
This can be anywhere from two years, five years, ten years or even thirty years. This is not to be confused with current debt , which are loans with a maturity of less than one year. Some firms will consolidate the two amounts into a generic current debt line item on the balance sheet. This schedule outlines the major pieces of a debt a company is obliged under, and lays it out based on maturity, periodic payments, and outstanding balance. Using the debt schedule, an analyst can measure the current portion of long term debt a company owes.
The loan terms specify equal principal payments over the five years. A company reduces this line item by making payments towards the debt. As payments are made, the cash account decreases but the liability side decreases an equivalent amount. If the new credit taken on is long term, the current debt is effectively rolled into the future.
From a cash flow perspective, there is no impact on whether debt is classified as a current liability or non-current liability. In financial modeling , it may be necessary to produce a full set of financial statements, including a balance sheet where the current portion of long term debt is shown separately.
Current portion of long-term debt (CPLTD) refers to the section of a company's balance sheet that records the total amount of long-term debt that must be paid within the current year. For example, if a company owes a total of $,, and $20, of it is due and must be paid off in the current year, it records $80, as long-term debt and $20, .
The term current maturities of long-term debt refers to the portion of a company's liabilities that are coming due in the next 12 months. Examples of this long-term debt include bonds as well as mortgage obligations that are maturing.
current maturity of long-term debt definition. See current portion of long-term debt. The current maturity of a company’s long-term debt refers to the portion of liabilities that are due within the next 12 months. As this portion of outstanding debt comes due for payment within the year, it is removed from the long-term liabilities account and recognized as a current liability on a company’s balance sheet.
Definition of current maturity of long-term debt: The amount of money to be received after obligations have been paid towards the principal amount on the loan. The current portion of long term debt is the amount of principal and interest of this amount due within one year’s time. This is not to be confused with current debt, which are loans with a maturity of less than one year.