Please help !
A company sold its finance receivables to a special purpose entity. Had the securitized finance receivables been held on the balance sheet, what would be the effect to the ratio of liabilities to total capital ?
Answer : Asset and liabilities would have been higher.
How come if the receivables had been held on the balance sheet, both assets and liabilities would have been higher?
Receivables are an asset so it makes sense that if they are held on the balance sheet, assets are higher. However, how come liabitlities are higher ? Thanks ! 