Off balance sheet financing may involve either:
A) An operating lease
B) A special purpose entity
C) Both of the above
D) Neither of the above

Question

Quizplus · Accepted Answer

Off balance sheet financing can involve either an operating lease or a special purpose entity or sometimes a combination of both to keep liabilities off the balance sheet. In an operating lease, the lease payments are treated as operational expenses rather than debt. In a special purpose entity, a separate legal entity is created to hold assets and take on debt, and the debt is not shown on the company's balance sheet. Therefore, both options are considered off balance sheet financing methods.

Off Balance Sheet Financing May Involve Either