Non-current liabilities are long-term debts that a company owes but isn't expected to pay within the next 12 months. They are also known as long-term liabilities. Non-current liabilities are crucial for evaluating a company's long-term economic health and ability to manage debt responsibly. They include long-term borrowings, lease obligations, debentures, and bonds payable.
For example, Delta Corporation, which operates a shipping business, might use bank loans to finance the purchase of large cargo ships. The company could also issue corporate bonds to fund expansion efforts, such as acquiring new routes or additional vessels. This allows Delta to spread the high cost of these investments over many years, making large capital expenditures more manageable without requiring significant upfront capital.
However, high levels of long-term debt can strain a company's financials, as principal and interest repayments may consume a large portion of future cash flows, especially if earnings are volatile. While non-current liabilities support long-term growth, they must be carefully managed to avoid financial pressure.
