Financial Debt

View Financial Glossary Index

Definition

Amount of non-operational debt that a company has. This can be thought of as debt that is non-critical for a company's operations.

To illustrate operational and non-operational debt:
Accounts payable is an operational debt used to pay suppliers of a firm for goods / services. If it doesn't pay these liabilities, it would be unable to continue day-to-day operations. Notes payable is a non-operational debt that represents written obligations to creditors in exchange for funds. If a firm doesn't make payments to its notes payable, there are no immediate consequences to operations. (Eventually, drastic consequences).

Financial Debt can be different than other types of short term obligations. Because financial debts can be larger in nature, they can be more complexly structured, along with terms that are enacted to protect both the lender/borrower. Companies facing difficult business odds may take on more debt for riskier ventures to "gamble" on a new product/strategy.

Formula

YCharts calculates this formula by summing up Long Term Debt, Current Portion Debt, Dividends Payable and Notes Payable.

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