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Off-balance-sheet business is usually divided into four major categories: A. Direct credit substitutes, trade and performance-related items, commitments and trade guarantees.
An operating lease, used in off-balance sheet financing (OBSF), is a good example of a common off-balance sheet item. Assume that a company has an established line of credit with a bank whose financial covenant condition stipulates that the company must maintain its debt-to-assets ratio below a specified level.
If someone or something is off balance, that person or thing is in a position where they are likely to fall or be knocked down: A gust of wind knocked/threw her off balance and she fell. confused or uncertain about what to do next: Many Republicans were thrown off balance by the Democrats landslide at the polls.
Off-balance-sheet items are contingent assets or liabilities such as unused commitments, letters of credit, and derivatives. These items may expose institutions to credit risk, liquidity risk, or counterparty risk, which is not reflected on the sectors balance sheet reported on table L.
Examples of off-balance sheet items Another example is accounts receivable (AR), where there is a risk of default from the customer. A company may sell this asset to another company who takes on the collection and risk associated with it, for a fee or percentage of the AR collected.
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Related Q&A to Which of the following are considered of off financing Balance Sheet Template

Off-balance sheet financing is an accounting practice where companies keep certain assets and liabilities from being reported on balance sheets. This practice helps companies keep debt-to-equity and leverage ratios low, resulting in cheaper borrowing and the prevention of covenants from being bdocHubed.
Methods of off-balance-sheet financing include selling receivables under certain conditions, providing guarantees or letters of credit, participating in joint ventures, research and development partnerships and operating leases.

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