Course · Act II: Due Diligence · Chapter 9
Off-balance-sheet liabilities
Why invoices factored with recourse are a loan, which other debt-like items a buyer adds to net debt, and why every hidden dollar of debt comes off the price one for one.
Key terms
- Off-balance-sheet debt
- An obligation to pay that doesn’t appear as debt on the balance sheet, through structures like special-purpose entities or recourse factoring.
- Factoring with recourse
- Selling invoices to a factor that can hand back the unpaid ones. The risk stays with the seller, so it is really a loan.
- Debt-like items
- Obligations a buyer adds to net debt even though they aren’t called debt: earn-outs owed, guarantees, unpaid bonuses and taxes, recourse factoring.
“Debt Off the Books” is part of the full course: 6 puzzles on off-balance-sheet liabilities. Biscuit Barrel is fictional; the frauds in the notes are real, settled cases. Try this act’s free chapter, “Adjusted EBITDA”, first.
“Debt Off the Books” is in Act II: Due Diligence. 6 puzzles, unlimited retries.
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