In this textbook, financial debt is defined as

Question

Quizplus · Accepted Answer

Financial debt is defined as the total debt of a company. It includes long-term debt as well as interest-bearing debt that is included in current liabilities. Choice A, long-term debt plus preferred stock, is incorrect because preferred stock is not considered debt. Choice B, total assets minus total equity, is incorrect because it does not specifically refer to debt. Choice D, long-term debt only, is also incorrect because it does not include any short-term interest-bearing liabilities. Financial debt includes long-term debt as well as any interest-bearing debt that is included in current liabilities. Choice A is incorrect because preferred stock is not a form of debt. Choice B is incorrect because it defines total debt rather than financial debt. Choice D is incorrect because it excludes interest-bearing debt included in current liabilities.

In This Textbook, Financial Debt Is Defined as