Debt structure describes a composition term debt used by companies, both short, medium, or long term, and is influenced by the size of these debts
Various kinds of debt, among others:
1. Short-Term Debt
2. Medium-Term Debt
3. Long-Term Debt
Short-Term Debt (Utang Jangka Pendek)
Source of funding short-term debt are grouped into:
- Passive decision variable, the amount of the funding sources will depend on other aspects of the decision in accordance with the company's activities. For example: purchase of raw materials on credit, accruals accounts.
- On The decision variable, companies must actively seek and obtain funding sources and in the codes should have formal agreements to creditors. For example: bank debt.
Medium-Term Debt (Utang Jangka Menengah)
In this type of debt repayment is usually paid when the asset is financed with debt are no longer needed. However, payments are also done regularly.
The benefits of this debt is that debt can be adjusted with available cash flow to pay off these debts.
Long-Term Debt (Utang Jangka Panjang)
In general, long-term debt has approximately more than 5 years, and some even believe that this debt has a 10-year period.
Long-term debt had ties with the capital structure. If the company borrows the funds and return it within a relatively long time then the loan / debt will become part of the company's capital structure.
Comparison between long-term debt that is borrowed and own capital is usually defined as the capital.
Long-term debt is also formed by the extension of loans / short term debt and medium term debt, it is seen on the basis of these debt payments.
The types of long-term debt include:
- Investment Credit
Considerations In Debt Decisions
The longer the loan / debt is more secure because of the smaller firms bear the risk of bankruptcy, but the cost of greater interest.
The greater the likelihood of extending the loan period, the greater the cost of the extension to be issued and is likely to bear the risk of bankruptcy.
Funding Period Structure
Financing strategy of each asset with a term roughly equivalent to the rotation period of these assets into cash. This approach is based on the matching principle which states that the source of funds should be adjusted to how long the funds needed.
Funding comes from corporate loans / debt both in the short term, medium, and in the long term. It also depends on the size of the company's activities. Consideration is taken to make the debt is not only based on company needs, but also must be grounded also the risk of loss or bankruptcy which will be experienced after the debt.