What is Average Annual Current Maturities
Average annual current maturities is the average amount of current maturities of long-term debt the company has to pay over the next 12 months. The calculation involves adding up all the current maturities for the year and dividing it by the number of debts.
BREAKING DOWN Average Annual Current Maturities
Average annual current maturities include the current portion of long-term debt the company will pay in the next year. It can also mean the average current maturities of a company's debts in terms of time frame, which is calculated as the average remaining time until its debts are paid off.
Average Annual Current Maturities Example
Current maturity is defined as the portion of long-term debt that will come due within the next 12 months. On the balance sheet, this amount of debt shows up under current liabilities as current portion of long-term debt. Each year the amount of current maturities is moved from long-term liabilities to current liabilities.
A company’s long-term debt can include mortgages, bonds, car loans and any other debt obligations that come due in more than a year. A company can lower the current portion of its debt by refinancing loans or using loans with balloon payments to lower its current portion due.
For example, Company ABC has a car loan that has $1,000 due this year. A real estate loan has current maturities of $5,000 due this year and an equipment note has $7,500 due within the next year. The average annual current maturities is $4,500. That is, the average current portion of each debt is $4,500.
Average Annual Current Maturities As A Time Frame
Average annual current maturities can also pertain to another type of current maturity. Current maturities may also be expressed as the total time before a debt is fully paid back. For example, if a loan was taken eight years ago and the final payback date is in 10 years, the current maturity is two years, meaning the debt matures in two years.
The average annual current maturities of all a company’s debts would be a yearly figure. For example, say Company ABC has its car loan due in two years, its real estate loan in 10 years and the equipment note in six years. In this case, the average annual current maturities is six years. If the average length of its debt is rising it means that the company will have debt payments for longer, generally meaning it’s taking on more debt.