For the life of me, I cannot make sense of this.
The study books say that if a company is selling their A/R to an SPV, that would reduce assets and liabilities. The opposite is also true, if we include off-balance sheet financing, an asset and a liability should be created, results in increased leverage ratios.
This is what I can’t understand—if we’re selling A/R into an SPV and we’re receiving cash, assets would remain the same right? Our A/R line item would decrease, but cash would increase by the same amount. So why are the books telling me assets would decrease if we sold A/R or increase if we brought A/R back onto the balance sheet?