Five golden tools of off-balance sheet financing;
1. Operating leases
. It is a kind of accounting. Due to not showing the assets and liabilities in the financial statements, the leverage ratio and profitability ratios (return on assets, return on investments and return on equity) are better shown than when the asset was purchased. be
2⃣ Sale of accounts receivable (Factoring)
When assets and liabilities are not identified, the sale of accounts receivable is considered an off-balance sheet financing tool. In this way of operation, the claims from accounts receivable will be cleared with the debt from their sale.
3 Special project financing
Due to the separation of the ownership of the project from its operator (performer) after the start of the project, revenues and costs are recognized regardless of the initial costs of the project. It is useful when the company has limited financial ability.
4⃣ Outsourcing
Outsourcing is the sale of a part of a business unit along with the personnel and production equipment that the business unit previously acquired from a foreign company, and then concluding a contract for the manufacture of equipment or performing services with the characteristics that it determines with another company. For example, a company Boghor entrusts the preparation of food for its employees to restaurants outside the company instead of hiring a cook and preparing the food by the company’s cook.
5⃣ Converting assets into securities (securitization)
That is, non-liquid assets are transformed into quick-liquid assets with a better management method. As bonds are issued, the cost of financing the company will decrease and no debt will be recognized, key ratios will improve. For example, assets such as dilapidated buildings that are difficult to sell.
Mehdi Koh Soltani (financial services, accounting, financial and tax consultant):
Link to the audit accounting clinic
https://t.me/joinchat/BnzBsTuioTshiXBwf9bBPQ