Long-Term Debt

  • John B. GuerardJr.
  • Anureet Saxena
  • Mustafa Gultekin


Long-term debt is the term given to those obligations the firm does not have to pay for at least a year. They are also called funded debt or fixed liabilities. Items that may be classed as long-term debt are bonds, debentures, term loans, or, in small firms, mortgages on buildings. The portion of the long-term debt due within the current year is carried in the current liability section of the balance sheet. Firms in the US issue far more debt than equity shares. In most years during the 1963–2003 period, firms have issued six to eight times more debt than equity. (Of course, most increase in equity is through retained earnings.) Issuing debt raises capital for firm growth and expansion without possibly lessening current stockholder control. The floatation costs are less on debt than on equity, and the cost of debt is less than the expected shareholder return on equity.


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Copyright information

© Springer Nature Switzerland AG 2021

Authors and Affiliations

  • John B. GuerardJr.
    • 1
  • Anureet Saxena
    • 2
  • Mustafa Gultekin
    • 3
  1. 1.McKinley Capital Management, LLCAnchorageUSA
  2. 2.McKinley Capital Management, LLCStamfordUSA
  3. 3.Kenan-Flagler Business SchoolUniversity of North Carolina Chapel HillChapel HillUSA

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