What is Debt Schedule?
The Short Answer
Debt Schedule explained simply
A Debt Schedule is a document that lists all of a business’s outstanding loans and other debt obligations. Think of it as a complete ledger for every loan you have. For each debt, it shows the original amount, the interest rate, the payment frequency, and how much principal and interest are paid over time. It also tracks the remaining balance after each payment. This schedule is crucial for understanding a company’s financial health and its ability to meet its obligations.
Real-World Example
The Coffee Shop Loan
Imagine a coffee shop owner, Maria, who took out a $50,000 loan to buy new equipment. The loan has a 5% annual interest rate and requires monthly payments over five years. Her Debt Schedule would show:
- Loan Amount: $50,000
- Interest Rate: 5%
- Term: 5 years
- Monthly Payment: $943.56
Each month, the schedule would detail how much of that $943.56 goes towards paying down the principal and how much goes to interest, along with the new outstanding balance. Over time, the principal portion of the payment increases, and the interest portion decreases.
Why this matters
A Debt Schedule is important for several reasons:
- Financial Planning: It helps you forecast future cash outflows for debt payments, which is key for budgeting.
- Lender Confidence: Lenders often ask for a Debt Schedule to assess your ability to repay new loans.
- Business Valuation: When selling a business, buyers will review the Debt Schedule to understand the company’s liabilities and how they impact future profitability.
Keep your Debt Schedule updated. Any changes to loan terms or new debts should be immediately added. This ensures you always have an accurate picture of your financial obligations.
Keep your Debt Schedule updated. Any changes to loan terms or new debts should be immediately added. This ensures you always have an accurate picture of your financial obligations.
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