Off-Balance Sheet Financing and Bonds
“Off-Balance Sheet Financing and Bonds” Please respond to the following:
- Company XYZ is considering using off-balance-sheet financing in order to obtain a loan from a local bank, but the company is unsure of the various forms of off-balance-sheet financing. For management, compare and contrast the various forms of off-balance-sheet financing. Give your opinion on whether or not Company XYZ should engage in off-balance-sheet financing. Provide a rationale with your response.
- Explain the primary advantages and disadvantages of issuing bonds with call features to potential buyers. Suggest two (2) improvements that a company could implement in order to make bonds with call features more attractive to potential buyers.
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There are various forms of off-balance-sheet financing which Company XYZ can use in obtaining a loan. Among them is the operating lease which provides the opportunity of utilizing a company’s leased asset by assuming a contractual obligation to make payment to the lessor within a given time without the need to report the asset and the liability. The take-or-pay contract…
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