Chartered Financial Analyst Level 2
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28 Which of the following is a type of balance sheet restructuring?
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A
Franchising
B
Outsourcing
C
Sale leaseback
Explanation:
Explanation:
Sale leaseback is a type of balance sheet restructuring where a company sells an asset (typically real estate or equipment) and then leases it back from the buyer. This transaction:
- Improves liquidity by converting fixed assets into cash
- Reduces debt on the balance sheet
- Maintains operational use of the asset through the lease arrangement
Why not the others:
- Franchising (A) is a business expansion strategy, not a balance sheet restructuring
- Outsourcing (B) is an operational restructuring that affects cost structure, not the balance sheet directly
Sale leaseback transactions are commonly used to optimize capital structure and improve financial flexibility.
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