When a business enterprise enters into what is referred to as off-balance-sheet financing, the company
A) is attempting to conceal the debt from shareholders by having no information about the debt included in the balance sheet.
B) wishes to confine all information related to the debt to the income statement and the statement of cash flows.
C) can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost.
D) is in violation of generally accepted accounting principles.

Question

Quizplus · Accepted Answer

Off-balance-sheet financing is a legitimate and common financial strategy used by companies to improve their balance sheet by not recording certain assets and liabilities directly on the balance sheet. This can make the company's financial position appear stronger, potentially making it easier and cheaper to obtain credit. It is not intended to conceal debt from shareholders but rather to manage how the company's financial health is presented.

When a Business Enterprise Enters into What Is Referred to as Off-Balance-Sheet