From the course: A Guide to Understanding Financial Statements
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Long term liabilities
From the course: A Guide to Understanding Financial Statements
Long term liabilities
- [Instructor] Let's now focus our discussion on long-term liabilities. Unlike current liabilities, long-term liabilities are liabilities that are expected to be repaid typically after a 12-month period. Examples of long-term liabilities can be a line of credit, a convertible note, or a capital lease. Let's talk about a few of these examples. A line of credit is, in essence, an amount lent where interest is charged on the amount borrowed. Put simply, this is debt. Because the amount is expected to be repaid in more than a 12-month period, you'll record it as a long-term liability. We also have what's known as convertible notes, which is a special type of debt that offers the right for future equity upon a qualifying financing event, and also includes a discount or a cap in the valuation. The general idea is that investors start off with debt, given the risky nature of the business, typically a startup. After the startup fulfills certain obligations, they can then convert that debt…
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