Average Annual Current Maturities
What Are Average Annual Current Maturities?
Average annual current maturities are the average amount of current maturities of long-term debt the company needs to pay throughout the next twelve months. The calculation includes adding up every one of the current maturities for the year and partitioning it by the number of debts.
Grasping Average Annual Current Maturities
Average annual current maturities incorporate the current portion of long-term debt the company will pay in the next year. It can likewise mean the average current maturities of a company's debts in terms of time span, which is calculated as the average leftover time until its debts are paid off.
Current maturity is defined as the portion of long-term debt that will come due inside the next 12 months. On the balance sheet, this amount of debt appears under current liabilities as the current portion of long-term debt. Every year the amount of current maturities is moved from long-term liabilities to current liabilities.
A company's long-term debt can incorporate mortgages, bonds, vehicle loans, and some other debt obligations that come due in over a year. A company can bring down the current portion of its debt by refinancing loans or utilizing loans with balloon payments to bring down its current portion due.
Special Considerations
Average annual current maturities can likewise relate to one more type of current maturity. Current maturities may likewise be communicated as the total time before a debt is completely paid back. For instance, in the event that a loan was required a long time back and the last payback date is in 10 years, the current maturity is two years, meaning the debt develops in two years.
In this case, the average annual current maturities of every one of the a company's debts would be a yearly figure. For instance, say Company ABC has its vehicle loan due in two years, its real estate loan in 10 years, and the equipment note in six years. In this case, the average annual current maturities is six years, or ((2 + 10 + 6)/3). Assuming the average length of its debt is rising it means that the company will have debt payments for longer, generally meaning it's assuming more debt.
Illustration of Average Annual Current Maturities
For instance, Company ABC has a vehicle loan that has $1,000 due this year. A real estate loan has current maturities of $5,000 due this year and an equipment note includes $7,500 due inside the next year. The average annual current maturities is $4,500, or (($1,000 + $5,000 + $7,500)/3). That is, the average current portion of every debt is $4,500.
Features
- Current maturities may likewise be communicated as the total time before a debt is completely paid back, communicated as years.
- Average annual current maturities are generally shown as a dollar amount.
- Current maturity is defined as the portion of long-term debt that will come due inside the next 12 months.
- A company's long-term debt can incorporate mortgages, bonds, vehicle loans, and some other debt obligations that come due in over a year.
- Average annual current maturities are the average amount of current maturities of long-term debt the company needs to pay throughout the next twelve months.
