If a company engages in off-balance sheet financing, generally the effect is:
I. to cause assets to be understated.
II. to increase leverage ratios.
III. to increase cash flows.
IV. to cause liabilities to be understated.
A) I, II, III and IV
B) I, III and IV
C) I and IV
D) IV only

Question

Quizplus · Accepted Answer

Off-balance sheet financing typically results in the understatement of both assets and liabilities, as these items are not recorded on the balance sheet.

If a Company Engages in Off-Balance Sheet Financing, Generally the Effect