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what is meant by term "off-balance sheetfinancing"?How can this practice potentially produce misleading financial...

what is meant by term "off-balance sheet financing"?

How can this practice potentially produce misleading financial statements and increased risk?

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Expert Solution

The financing by debt and liability not present in the balance sheet is called off balance sheet financing,Operating leases and partnerships are different forms of off balance sheet financing.
This practice is dangerous and has potential risks because a highly leveraged firm can increase its liability even more without showing it in the balance sheet thus masking the potential danger of the company form its investors.

jeff jeffy answered 2 years ago
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