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Wednesday, April 11, 2007 1:52:07 PM
"I was actually surprised that they reduced long term debt (almost paid it off completely). It’s kind of unusual, and I was speculating about some positive scenarios, when company prefers to be debt free. So, I asked Maria about this and the answer was simple – those loans have just expired and had to be paid off."
Long term debt is reclassified on the balance sheet as a current liability when it has to be paid off within one year. That is why current liabilities are now $5 million, not that the company liquidated its long term debt entirely. Current liabilities also increase when the company does not pay bills when they come due, and this happens especially at the end of the fiscal year if the company wants to show greater profits.
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