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Simple English definitions for legal terms
short-term debt
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A quick definition of short-term debt:
Short-term debt is money that a person or company owes and must pay back within a year or less. It is a type of liability, which means that the person or company is legally responsible for paying back the debt. Other types of liabilities include financial obligations like taxes and debts that are not yet due, but will be in the future. Short-term debt is different from long-term debt, which is money that is owed for a longer period of time, usually more than a year.
A more thorough explanation:
Short-term debt refers to a financial obligation that a company or individual owes and must pay back within a year or less. It is also known as current liability.
Examples of short-term debt include:
- Credit card debt
- Payroll expenses
- Accounts payable
- Short-term loans
For instance, if a company borrows money to pay for its operating expenses, it may have to repay the loan within a year. This loan is considered short-term debt. Similarly, if an individual uses a credit card to make purchases, they must pay back the amount owed within a certain period, usually a month. This credit card debt is also an example of short-term debt.