The Short Answer

What Is the Difference Between Short-Term and Long-Term Debt?

Textbook Definition

Short-term debt is borrowing due within 12 months, including notes payable, commercial paper, and the current portion of long-term debt. It is a current liability. Long-term debt is borrowing with maturities beyond 12 months, such as bonds and term loans.

In Plain English

If it has to be paid back within a year, it is short-term. If it can wait longer, it is long-term. Each year, the slice of long-term debt coming due moves up into short-term debt.

Short-Term Debt (Apple)

Notes Payable + Current Portion of Long-Term Debt

Fiscal 2025: 7,979 + 12,350 = $20,329M

Long-Term Debt Share

Long-Term Debt ÷ Total Assets

Fiscal 2025: 21.8%

Short-term debt sits in current liabilities, near the top of the liabilities side of the balance sheet. Long-term debt sits below it, with the other long-term liabilities.

One Real Company

Apple’s Debt, 2021 to 2025

Short-term debt bounced around. Long-term debt fell every single year.

Company: Apple Inc.Fiscal years end in SeptemberUnits: $ millions
Line20252024202320222021
Notes payable7,9799,9675,9859,9826,000
Current portion of long-term debt12,35010,9129,82211,1289,613
Short-term debt20,32920,87915,80721,11015,613
Long-term debt78,32885,75095,28198,959109,106
Long-term debt, % of total assets21.8%23.5%27.0%28.1%31.1%
Debt ratio27.5%29.2%31.5%34.0%35.5%

Source: Apple Form 10-K filings as analyzed in the book. $ millions. Debt ratio = total debt ÷ total assets.

Worked Example: Apple, Fiscal 2025 ($ millions) Short-term debt: 7,979 + 12,350 = 20,329 Long-term debt share: 78,328 ÷ 359,241 = 21.8% of total assets Debt ratio: (20,329 + 78,328) ÷ 359,241 = 98,657 ÷ 359,241 = 27.5% Five-year change in long-term debt: 109,106 − 78,328 = 30,778 paid down.

The Method

How to Read a Company’s Debt in 5 Steps

  1. Add up short-term debt.

    Notes payable, commercial paper, and the current portion of long-term debt. Apple’s was $20.3 billion in 2025.

  2. Check it against cash.

    Short-term debt is due soon. Apple had about $54.7 billion of cash and short-term investments to cover it.

  3. Read the long-term trend.

    Rising long-term debt means more borrowing or funding operations with loans. Falling means paying down. Apple fell every year.

  4. Divide by total assets.

    The percentage shows how much of the company is funded by borrowing. Apple went from 31.1% to 21.8%.

  5. Check interest coverage.

    Can operating profit cover the interest bill? Apple covered it 29 to 41 times over in the years it reported interest separately.

Why Paying Down Debt Matters

Less debt means smaller interest payments and less risk if sales slow. Apple had been loading up on long-term debt in earlier years. In this period it reversed course. That shows up in every leverage ratio, including debt-to-equity.

Compare It

Apple vs. Microsoft: Bigger Company, Less Debt

Latest fiscal yearAppleMicrosoft
Long-term debt$78B$40B
Total assets$359B$619B

Microsoft’s fiscal year ends in June, Apple’s in September.

Microsoft is now the larger company by total assets, yet it carries about half of Apple’s long-term debt. Both have been paying debt down. Apple simply leans on borrowed money more. Size alone never tells you who carries more debt.

Why Companies Borrow

Why Would a Company Use Short-Term Debt at All?

Short-term borrowing has two very different stories behind it, and the balance sheet alone will not tell you which one you are looking at.

The worrying story: the company is not bringing in enough cash to pay its bills, so it borrows to cover the gap. If short-term debt keeps climbing year after year while cash shrinks, that is a company leaning on loans to stay current. That can turn dire fast.

The routine story: a large, healthy company issues commercial paper and rolls over maturing bonds as normal cash management. Its short-term debt rises and falls a little each year, but the amounts are small next to the cash it generates. That is Apple. Its short-term debt moved between $15.6 billion and $21.1 billion while it produced more than $100 billion a year in operating cash.

Long-term debt has its own logic. Companies borrow long to fund things that last, like buildings, equipment, or a big buyback program, and pay it back over many years. A steady long-term debt level can mean a company has found the capital structure it wants. A rising one means more risk. A falling one, like Apple’s, means less.

  • Rising short-term debt plus falling cash: look closer.
  • Steady short-term debt with strong cash flow: routine.
  • Falling long-term debt as a share of assets: lower risk.

Beginner Traps

What Do Beginners Get Wrong About Debt on a Balance Sheet?

  • Forgetting the current portion of long-term debt is short-term debt.
  • Ignoring long-term debt because nothing is due this year.
  • Reading dollars instead of the share of total assets.
  • Assuming all debt is bad. Used well, it boosts returns.
  • Missing interest coverage, the real test of debt risk.
  • Lumping interest-free accruals in with interest-bearing loans.

How the Book Grades Apple’s Debt

B+Short-Term Debt
ALong-Term Debt
ADebt Ratio
A*Times Interest Earned
The asterisk on times interest earned has a story. It is in the book.Get the Book on Amazon →

From the Book

A Healthy, Conservative Move

Balance Sheet · Long-Term Debt

Paying It Down

Reducing long-term debt lowers a company’s risk and its interest costs, so this is a healthy, conservative move by management.

Every liability on Apple’s balance sheet, the debt ratios that test them, and a grade for each.

Get the Book on Amazon →

Thinking About a Loan?

Short-term or long-term, the first question is whether the debt pays for itself. Read good debt vs. bad debt. Need a lender-ready plan with the debt built in? Dr. Paul writes them. See business plan writing services.

Beyond the Book

Put These Numbers to Work on Your Own Business

The book teaches you to read the numbers. These three take you from reading them to using them.

Business Plan Templates

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See the Templates →

Business Plan Writing

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Business Consulting

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FAQ

Short-Term and Long-Term Debt Questions

Is the current portion of long-term debt short-term debt?
Yes. The part of a long-term loan or bond that comes due within the next 12 months moves to current liabilities. Analysts count it as short-term debt even though it began as long-term borrowing.
Where is long-term debt on a balance sheet?
Below current liabilities, in the long-term or non-current liabilities section. Apple labels it term debt in its 10-K. It covers any borrowing not due within the next 12 months.
Is it good for a company to pay down long-term debt?
Usually, yes. Less debt means lower interest costs and less risk in a downturn. But some debt can raise returns for owners, so the goal is the right amount, not zero.

Keep Going

Related Guides

Debt connects the balance sheet to the leverage ratios.

Guide 15 · Payables vs. Accrued

The interest-free side of current liabilities.

Guide 17 · Treasury Stock

Why billions in buybacks leave this line blank.

Guide 29 · ROA vs. ROE

How debt and equity change the return ratios.
← Previous · Guide 15Accounts Payable vs. Accrued Expenses

Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.

This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.