Effective Debt

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What is a good debt ratio, and what is a bad debt ratio?

  2. Why would you look at a company's net debt rather than its gross debt?

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  4. Why is debt issued in both temporary and permanent forms?

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  5. What are typical forms of long-term debt for a public company?

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