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What are some forms of off- balanced-sheet financing? Why might a company be interested in using...

What are some forms of off- balanced-sheet financing? Why might a company be interested in using off-balance sheet financing?

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Answer #1

Off- balanced-sheet financing mean company finance fund but liability and debt of company does not increase. these financing does not report in balance sheet, so overall level of debt and equity remains constant even after financing.

Common off- balanced-sheet financing is operating lease and partnership. in operating lease company rent assets and use it for operation but not reported in balance sheet.

Some of the reason of off- balanced-sheet financing is mention below:

1. Helps in manage debt equity or debt ratio.

2. Increase debt capacity of company.

3. Partnership with research and development helps the company in lower cost, because research and development cost is considered as expensive.

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