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

question 70

Multiple Choice

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 flow.
• 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.

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Definitions:

Depositors

Individuals or entities who place their money in a bank for safekeeping and earn interest over time.

Gramm-Leach-Bliley Act

A U.S. federal law enacted in 1999 that allows financial institutions to offer a broader range of services, including banking, securities, and insurance.