Final answer:
The presentation of long-term liabilities should disclose maturity dates, interest rates, and conversion rights, which help investors evaluate the present value of the debt and understand the company's future cash flows and financial obligations.
Step-by-step explanation:
The presentation of long-term liabilities on the balance sheet should include several key disclosures. These disclosures are important as they provide an investor or any interested party with vital information about the nature of a company's debt obligations. Among the disclosures are:
- Maturity dates: The specific dates when the principal amount of a bond or other form of debt is due to be paid.
- Interest rates: The rate at which the borrower must compensate the lender for the use of the borrowed funds over the life of the bond.
- Conversion rights: If applicable, this refers to the bondholder's right to convert the bond into shares of the issuing company.
Each of these aspects provides a clearer picture of the obligations a company has and the terms under which they have borrowed money. Doing so aids in the assessment of the company's financial health and helps estimate the present value of bonds or other long-term debt instruments. By factoring in maturity dates, interest rates, and conversion rights, investors can understand the future cash flows associated with the debt and its potential impact on liquidity and risk management.