Leasing is often referred to as off-balance sheet financing because lease payments are shown as operating expenses on a firm's income statement and,under certain conditions,leased assets and associated liabilities do not appear on the firm's balance sheet.

Off-Balance Sheet Financing

Off-Balance Sheet Financing is a financial obligation that is not directly recorded on the company's balance sheet and is used to keep debt-to-equity ratios low and improve financial indicators.

Operating Expenses

Costs associated with a company's main operational activities, excluding cost of goods sold, financing costs, and taxes.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in the net income or loss for that period.