Effective Debt

AAA

DEFINITION of 'Effective Debt'

The net sum of all of a company's outstanding debt. In addition to standard debt issues, this figure will also aggregate and capitalize any payments that the company is regularly making, such as mortgage or lease payments.

INVESTOPEDIA EXPLAINS 'Effective Debt'

The effective debt metric gives investors a more accurate measure of a company's overall debt load. Companies operating in certain sectors, such as real estate and retail, can have a good portion of their liabilities tied up in real estate leases and payments, and a thorough cash flow analysis should take these payments into account.

RELATED TERMS
  1. Statutory Debt Limit

    A debt limit established under the Second Liberty Bond Act of ...
  2. Capital Lease

    A lease considered to have the economic characteristics of asset ...
  3. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  5. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  6. Off-Balance-Sheet Financing

    A form of financing in which large capital expenditures are kept ...
Related Articles
  1. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  2. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  3. Fundamental Analysis

    What is the difference between a capital gearing ratio and a net gearing ratio?

    Understand the definition of gearing in the finance industry, the difference between net gearing and capital gearing ratios and how they are interpreted.
  4. Fundamental Analysis

    What is the difference between interest coverage ratio and DSCR?

    Understand the basics of the interest coverage ratio and the debt-service coverage ratio, including calculations and how each type reflects financial stability.
  5. Investing Basics

    What is the difference between accrual accounting and accounts payable?

    Understand the difference between accrual accounting, an accounting method, and accounts payable, which is a ledger entry within the accounting system.
  6. Fundamental Analysis

    When does a business report gross margins?

    Learn how gross margins are calculated and when publicly traded companies release these figures. Explore consensus street estimates.
  7. Accruals represent liabilities and non-cash-based assets.
    Investing

    What does Accrual Mean?

    In accrual-based accounting, transactions are recorded on the books as they occur, even if payment has not yet been received or made. Accruals represent liabilities and non-cash-based assets. ...
  8. Investing Basics

    How To Calculate Goodwill

    Goodwill is an intangible, but it is still possible to effectively calculate or estimate goodwill for a company.
  9. Fundamental Analysis

    Why are capital expenses (CAPEX) treated differently than current expenses?

    Learn the difference between capital expenditures, or CAPEX, and current expenses, and determine why they are treated differently on income taxes.
  10. Fundamental Analysis

    Does a capital expenditure (CAPEX) immediately affect income statements?

    Learn the direct and indirect effects a capital expenditure, or CAPEX, may immediately have on a business' income statements and its profit.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center