DIFF btwn STL vs LTL vs CL on basis of period...

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CAn ny body tell me ,on basis of repayment schedule...

How to classify

1. SHORT TERM LOAN.

2. LONG TERM LOAN.

3. CURRENT LIABILITY.

???????

IS IT

<3 YRS

>3 YRS

<1 YRS

RESPECTIVILY..........

PLEASE CONFIM...

 

Replies (3)

If i am not mistaken:-

Short Term Loan <5 Years

Long Term Loans > 5 Years

Current Liability< 1 Year

i think period  for short term n long term is 3 years not 5 years 

First you should know difference btwn short term loan and current liability.

short term loan  is taken to finance the sort term need ie. working capital requirment (Here i am assuming that you know the meaning of working capital being a C.A. student)

current liability is itself a part of working capital which arises in normal course of business we need not to take cash as in the case of short term loans.

now if you are clear with these both the term then whether any liability is long term or short term will depends apon period in which it is payeble.

if period of liability > 1 year it will be long term

if period of liability < 1 year it will be short term

and current liability never can be for moare than 1 year.

some authers also take midium term in considration (1year < X > 5year)


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