Long term debt is money that a company owes and is required to pay back over a period exceeding one year. It is often used by companies to finance large projects or expansions and is a key aspect in understanding a company's financial health.
While the basic definition of long term debt is straightforward, there's more to this financial term. Long term debt can include various liabilities such as bonds, lease obligations, pension obligations, and loans from financial institutions that are due after a year's time.
Long term debt is an important part of a company's capital structure and is often used by businesses to generate the funds needed for large-scale investments and operations. It can reflect on a company's ability to meet its financial obligations and is closely watched by investors, creditors, and analysts.
However, a high level of long term debt, when compared to equity, can indicate potential financial risk. Therefore, it is important to consider this factor in conjunction with other financial metrics to gain a comprehensive understanding of a company's financial standing.
For Ford, long term debt includes obligations from loans, bonds, and other financial instruments taken to fund operations, new model development, and expansion plans. The repayment of these obligations extends over several years.
For Apple, long term debt might include bonds issued to finance its research and development activities, and other operational costs. Even though Apple has a large cash reserve, utilizing long term debt allows it to take advantage of low-interest rates and preserve its cash for other uses.
Delta's long term debt could include loans taken to purchase aircraft and fund expansion to new routes. These debts are generally spread over a prolonged period due to the large capital outlay required in the airline industry.