Which of the following describes short-term debt?

• A. Repaid in over five years
• B. Represents long-term investments
• C. Repaid in one year or less
• D. Always includes mortgages

Answer: (C)

Short-term debt refers to obligations that are due to be repaid within a year or less. This type of debt is often used to finance immediate needs, such as operational expenses, working capital, or other short-term requirements of a business. It is distinguished from long-term debt, which typically has a repayment period extending beyond one year. The characteristics of short-term debt also imply that it usually involves quicker cash flow requirements and might come with different interest rates compared to long-term financing.

In contrast, options that describe debts repaid in over five years or long-term investments do not align with the definition of short-term debt. Mortgages specifically are generally considered long-term debts, as they usually involve repayment terms extending beyond one year, often several decades. Thus, the description of short-term debt as obligations repaid in one year or less accurately captures its essence and distinguishes it from other forms of financial obligations.