Question

The principle and interest paid on long-term debt is considered highly liquid.

true or false

Answer 1

Long term debt: Amount owed for a period exceeding 12 months from the date of the balance sheet. It could be in the form of a bank loan, mortgage bonds, debenture, or other obligations not due for one year. A firm must disclose its long-term debt in its balance sheet with its interest rate and date of maturity.

A company's interest payments sometimes cover only a portion of the period's interest expense. A business reports the interest that has accrued but not yet been paid as “interest payable” in the liabilities section of the balance sheet.Add each long-term debt's accruedinterest to figure your total interest payable

Principle of Long-term debt: To start a business capital is required to the promoters to start up a business.Long term loans from banks and financial institutions will provide loans.At fixed rate of interest loans will be granted for the long term.we have to make the interest payments with in the time.eventhough company is incurring losses ,interest amount should be paid compulsory.

Interest paid on long-term borrowing loans is highly liquid because interest should be paid for the every year on the principal amount even though company is in losses.