Book value of debt definition
/What is the Book Value of Debt?
The book value of debt is comprised of the following line items on an entity’s balance sheet:
Notes payable. Found in the current liabilities section of the balance sheet.
Current portion of long-term debt. Found in the current liabilities section of the balance sheet.
Long-term debt. Found in the long-term liabilities section of the balance sheet.
The following liability section of a balance sheet exhibit indicates where these debt items are located on the balance sheet.
What is Not Included in the Book Value of Debt
The book value of debt does not include accounts payable or accrued liabilities, since these obligations are not considered to be interest-bearing liabilities.
How the Book Value of Debt is Used
The book value of debt is commonly used in liquidity ratios, where it is compared to either assets or cash flows to see if an organization is capable of supporting its debt load.