Definition:

Long-Term Debt (excl. Lease Obligations) refers to the portion of a company's total debt that is due for repayment beyond one year from the balance sheet date, excluding any obligations related to leases. This typically includes bonds, bank loans, and other forms of debt financing.

Examples

Examples of long-term debt excluding lease obligations include corporate bonds issued by a company, long-term bank loans, and debentures.

Formula:

Long-Term Debt (excl. Lease Obligations) = Total Long-Term Debt - Lease Obligations

How to use the metric:

This metric is used to assess a company's financial leverage and long-term financial stability. Investors and analysts examine it to understand the company's debt structure and its ability to meet long-term obligations. It is also used in calculating financial ratios such as the debt-to-equity ratio.

Limitations:

One limitation of this metric is that it does not account for lease obligations, which can be significant for companies with substantial leasing activities. Additionally, it does not provide insights into the terms of the debt, such as interest rates or covenants, which can affect a company's financial health.

Applies to:

This metric is applicable to industries with significant capital expenditures and long-term financing needs, such as manufacturing, utilities, and telecommunications.

Doesn't apply to:

It may not be as relevant for industries with minimal long-term debt requirements or those that rely heavily on leasing, such as technology startups or service-oriented businesses, where lease obligations can be a more significant part of their financial structure.

Summary:

Long-Term Debt (excl. Lease Obligations) is a key financial metric used to evaluate a company's long-term financial commitments and leverage, excluding lease-related debts. While useful for understanding a company's debt structure, it has limitations, particularly in industries where leasing is prevalent.