Celine Edena - 2201747804

Eveline Ridwan Putri - 2201813586 Task Group Session 6

Henny Fausta - 2201750295 Long-Term Debt Paying Ability
Isabel Joyceline - 2201752432 LE53
Jessica Stevanie H - 2201765574 Business Valuation Analysis
Karina Sahadi - 2201750206
Marchella Lukito - 2201845373

1. Explain what is meant by the long-term debt paying ability ?

Basicly, we can describe long-term debt paying ability as a measure of a company's ability
to meet its obligations to pay its long-term debt. Being able to pay its debt for a short-term or
long-term means the firm is being financially sustainable. So, we can conclude that long-term
debt paying ability represents the financial position of the company and the company's ability
to meet all its financial requirements.
Long-term debt paying ability of a firm can be viewed as indicated by the income
statement and by the balance sheet. Time interest earned, long-term debt ratio and debt ratio
are some of the indicators of firm's long-term debt paying ability. But, the most significant
ratio to measure of long-term debt paying ability is time interest earned.

2. Who needs information about the company’s long-term debt paying ability ?
Creditors are interested to know if a company can pay its long-term debts. Creditors,
especially long-term creditors, want to know whether a borrower can meet its required
interest payments when these payments come due.
Not only creditors, but also shareholders. Shareholders need information about company's
long-term debt paying ability, because they concerned about their investment in that firm.
Generally, greater amount of company’s debt means greater financial risk of its bankruptcy.
So, both creditors and shareholders will keep an eye on company's long-term debt paying
ability.