# Noncurrent Liabilities: Definition, Examples, and Ratios

> **Definition**
>
> Noncurrent liabilities are financial obligations on a company’s balance sheet that aren’t due for more than a year.

## What Are Noncurrent Liabilities?

Noncurrent liabilities, also called [long-term liabilities](https://www.investopedia.com/terms/l/longtermliabilities.asp) or [long-term debts](https://www.investopedia.com/terms/l/longtermdebt.asp), are long-term financial obligations listed on a company’s balance sheet. These liabilities have obligations that become due beyond 12 months in the future, as opposed to current liabilities, which are short-term debts with maturity dates within the following 12-month period.

### Key Takeaways

*   Noncurrent liabilities, also known as long-term liabilities, are obligations listed on the balance sheet not due for more than a year.
*   Various ratios using noncurrent liabilities are used to assess a company’s leverage, such as debt-to-assets and debt-to-capital.
*   Examples of noncurrent liabilities include long-term loans and lease obligations, bonds payable, and deferred revenue.

![Noncurrent Liabilities](https://www.investopedia.com/thmb/bgVTfqeik58J9O7bI_2nj-y5oAQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/noncurrentliabilities_definition_0929-885b4515b4004f8eac66c02f5cf8462b.jpg)

*— Sydney Saporito / Investopedia*

## Understanding Noncurrent Liabilities

Noncurrent liabilities are compared to [cash flow](https://www.investopedia.com/terms/c/cashflow.asp), to see if a company will be able to meet its financial obligations in the long term. While lenders are primarily concerned with short-term [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) and the amount of [current liabilities](https://www.investopedia.com/terms/c/currentliabilities.asp), long-term investors use noncurrent liabilities to gauge whether a company is using excessive [leverage](https://www.investopedia.com/terms/l/leverage.asp). The more stable a company’s cash flows, the more [debt](https://www.investopedia.com/terms/d/debt.asp) it can support without increasing its [default](https://www.investopedia.com/terms/d/default2.asp) risk.

> **Important**
>
> While current liabilities assess liquidity, noncurrent liabilities help assess solvency.

Investors and creditors use numerous financial ratios to assess liquidity risk and leverage. The debt ratio compares a company’s [total debt to total assets](https://www.investopedia.com/terms/t/totaldebttototalassets.asp), to provide a general idea of how leveraged it is. The lower the percentage, the less leverage a company is using and the stronger its equity position. The higher the ratio, the more financial risk a company is taking on. Other variants are the [long-term debt-to-total assets](https://www.investopedia.com/terms/l/long-term-debt-to-total-assets-ratio.asp) ratio and the [long-term debt-to-capitalization ratio](https://www.investopedia.com/terms/c/capitalization-ratios.asp#:~:text=The%20long%2Dterm%20debt%20to,Sabrina%20Jiang%20%C2%A9%20Investopedia%202021), which divides noncurrent liabilities by the amount of capital available.

Analysts also use coverage ratios to assess a company’s financial health, including the cash flow-to-debt and the [interest coverage ratio](https://www.investopedia.com/terms/i/interestcoverageratio.asp). The [cash flow-to-debt ratio](https://www.investopedia.com/terms/c/cash-flowtodebt-ratio.asp) determines how long it would take a company to repay its debt if it devoted all of its cash flow to debt repayment. The interest coverage ratio, which is calculated by dividing a company’s [earnings before interest and taxes (EBIT)](https://www.investopedia.com/terms/e/ebit.asp) by its debt interest payments for the same period, gauges whether enough income is being generated to cover interest payments. To assess short-term liquidity risk, analysts look at [liquidity ratios](https://www.investopedia.com/terms/l/liquidityratios.asp) like the current ratio, the quick ratio, and the acid test ratio.

## Examples of Noncurrent Liabilities

Noncurrent liabilities include [debentures](https://www.investopedia.com/terms/d/debenture.asp), long-term loans, bonds payable, [deferred tax liabilities](https://www.investopedia.com/terms/d/deferredtaxliability.asp), long-term lease obligations, and pension benefit obligations. The portion of a bond liability that will not be paid within the upcoming year is classified as a noncurrent liability. Warranties covering more than a one-year period are also recorded as noncurrent liabilities. Other examples include [deferred compensation](https://www.investopedia.com/terms/d/deferred-compensation.asp), [deferred revenue](https://www.investopedia.com/terms/d/deferredrevenue.asp), and certain healthcare liabilities.

Mortgages, car payments, or other loans for machinery, equipment, or land are all long-term debts, except for the payments to be made in the subsequent 12 months, which are classified as the [current portion of long-term debt](https://www.investopedia.com/terms/c/currentportionlongtermdebt.asp). Debt that is due within 12 months may also be reported as a noncurrent liability if there is an intent to refinance this debt with a financial arrangement in the process to restructure the obligation to a noncurrent nature.

## What Are Noncurrent Liabilities Compared to?

Noncurrent liabilities are compared to cash flow, to see if a company will be able to meet its long-term financial obligations.

## How Do Investors Use Noncurrent Liabilities?

Long-term investors use noncurrent liabilities to gauge whether a company is using excessive leverage.

## What Do Noncurrent Liabilities Include?

Noncurrent liabilities include:

*   Bond liability that won’t be paid within the upcoming year
*   Bonds payable
*   Certain healthcare liabilities
*   Debentures
*   Debt due within 12 months, if the intent is to refinance it with a financial arrangement in the process to restructure the obligation to a noncurrent nature
*   Deferred compensation
*   Deferred revenue
*   Deferred tax liabilities
*   Long-term lease obligations
*   Long-term loans
*   Mortgages, car payments, or other loans for machinery, equipment, or land—except for payments to be made in the subsequent 12 months, which are classified as the current portion of long-term debt
*   Pension benefit obligations
*   Warranties covering more than a one-year period

## The Bottom Line

Noncurrent liabilities are long-term financial obligations listed on a company’s [balance sheet](https://www.investopedia.com/terms/b/balancesheet.asp). These liabilities, also called long-term liabilities or long-term debts, have obligations that become due beyond 12 months in the future.