What happens to mandatory debt repayments as their repayment dates approach?

As repayment dates for mandatory debt approach, these obligations are reclassified from long-term liabilities to current liabilities on the balance sheet. Long-term liabilities are debts that are due in more than one year, while current liabilities are those that are due within one year. This reclassification reflects the shifting of the repayment obligation from a longer-term perspective to a short-term perspective, acknowledging that the company must settle these debts in the near future.

This categorization is crucial for stakeholders as it affects liquidity ratios and overall financial analysis, indicating the company's short-term financial obligations. Thus, the correct understanding of this process is important for evaluating a firm's financial health as repayment dates near.