How does a write-down of equipment affect the company's debt?

The write-down of equipment represents a reduction in the carrying value of the asset on the balance sheet due to impairment. This accounting action affects the asset side of the balance sheet, specifically reducing the value of equipment, which is treated as a long-term asset. However, it does not affect the company's liabilities or its debt balances.

When a write-down occurs, it results in a loss being recognized in the income statement, which may impact retained earnings; however, it does not entail any cash transactions that would alter the company's obligations to creditors. Since the debt, defined as the total liabilities the company owes, remains unchanged, the correct understanding is that the company's overall debt stays the same despite the decrease in asset value resulting from the write-down.

In summary, since the write-down only modifies the value of equipment and does not involve any actual cash outflow or changes in liabilities, the company's debt does not experience any change.