Short-term Debt | StockSignal

How it relates

Accounts PayableAccounts payable is the amount the company owes suppliers for goods and services already received. It represents short-term bills that still need to be paid.+Short-term Debt+Deferred RevenueDeferred revenue is money the company has collected in advance for products or services it has not yet delivered. It represents an obligation to provide value in the future.+Other Current LiabilitiesOther current liabilities are smaller or mixed short-term obligations that do not fit into specific categories, such as certain taxes or accrued expenses. They still need to be paid within a year.=Total Current LiabilitiesTotal current liabilities are obligations that must be paid within a year, such as supplier bills, short-term debt and taxes due. They are important for understanding short-term pressure on cash.

Short-term Debt+Long-term DebtLong-term debt is borrowing that is due more than one year in the future, such as bonds and bank loans. It can help finance growth but also increases financial risk.=Total Debt (MRQ)Total debt (MRQ) is the amount of all interest-bearing debt at the end of the most recent quarter. Higher debt can increase risk but also help finance growth.

Where it fits

Short-term Debt→Leverage

Short-term debt represents borrowed money that must be repaid within one year, including bank loans, commercial paper, lines of credit, and the current portion of long-term debt coming due. This current liability creates near-term repayment obligations that must be met from operating cash flow, asset sales, or refinancing. Managing short-term debt is critical for maintaining liquidity.

Components of short-term debt:

Bank lines of credit: Revolving credit facilities with banks
Commercial paper: Short-term unsecured promissory notes
Current portion of long-term debt: Long-term debt principal due within one year
Bank overdrafts: Negative bank account balances
Short-term loans: Bridge financing and working capital loans

Why short-term debt matters:

Liquidity pressure: Must be repaid soon regardless of business conditions
Refinancing risk: May need to replace maturing debt
Interest rate exposure: Often floating rate, sensitive to rate changes
Working capital funding: Finances operations between cash collections

Short-term debt vs. accounts payable:

Short-term debt: Borrowed money with interest obligations
Accounts payable: Trade credit; typically no interest if paid on time

Analysing short-term debt:

Current ratio impact: Short-term debt is in current liabilities
Cash coverage: Can cash and near-cash cover short-term debt?
Maturity schedule: When specifically is repayment required?
Interest rates: Fixed vs. floating; current cost of borrowing

Liquidity metrics:

Cash / Short-term Debt: Immediate coverage
(Cash + Receivables) / Short-term Debt: Quick coverage
Operating Cash Flow / Short-term Debt: Cash generation coverage

Risk factors:

High reliance: Funding long-term needs with short-term debt is risky
Market conditions: Credit markets can freeze, making refinancing difficult
Covenant compliance: Short-term facilities often have restrictive covenants
Rollover risk: Lenders may not renew facilities

Prudent companies maintain backup liquidity through unused credit lines and cash reserves to ensure they can meet short-term debt obligations even if refinancing markets become difficult.