Short term debt, often referred to as 'current liabilities', is the debt a company needs to pay off within the next fiscal year. It includes payments for loans, accounts payable, and other business-related costs that are due within a year.
Short term debt is a key aspect of a company's financial health and is included in the analysis of its liquidity and cash flow. This type of debt includes accounts payable (money owed to suppliers), notes payable (short-term loans to be paid within a year), and the current portion of long-term debt (debt that will be due in the next fiscal year).
The management of short-term debt is crucial for a company's operations as it impacts the company's creditworthiness and ability to acquire more credit in the future. High short-term debt can indicate a company is over-leveraged and could face liquidity issues, while low short-term debt could suggest the company is not fully utilizing its available resources for growth.
However, it is essential to compare the short-term debt to the company's current assets to assess its ability to meet its obligations. This is often done using the liquidity ratios like the current ratio and the quick ratio.
For Amazon, short-term debt includes accounts payable to its suppliers, short-term loans, and the portion of long-term debt that is due within the next year. This is paid off using the revenue generated from sales.
Apple's short-term debt consists of payments owed to suppliers (accounts payable), short-term borrowings, and the current part of its long-term debt. These are paid off using the income generated from the sale of its products and services.
For Tesla, short-term debt includes accounts payable for parts and materials, short-term loans, and the portion of long-term debt due within the year. These are paid off using the revenue from the sale of its electric vehicles and energy products.