Business Studies

In the company's balance sheet, debentures are shown under the head _____________.


ANSWER

Non-Current Liabilities


SOLUTION

Noncurrent liabilities are those obligations not due for settlement within within one year. These liabilities are separately classified in an entity's balance sheet, away from current liabilities. Examples of noncurrent liabilities are:

  • Long-term portion of debt payable

  • Long-term portion of bonds payable

The aggregate amount of noncurrent liabilities is routinely compared to the cash flows of a business, to see if it has the financial resources to fulfill its obligations over the long term. If not, creditors will be less likely to do business with the organization, and investors will not be inclined to invest in it. A factor to be considered in this evaluation is the stability of an organization's cash flows, since stable flows can support a higher debt load with a reduced risk of default.

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Single Correct Medium Published on 18th 08, 2020
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