OFF-BALANCE SHEET FINANCING a. is a form of borrowing in which the obligation is not recorded on the borrower's financial statements. Off-balance sheet financing can employ several different techniques, which include development arrangements, leasing, product financing arrangements or recourse sales of receivables. Off-balance sheet financing will raise concerns regarding the lenders' overall risk, but it improves their debt to equity ratio, which enhances their borrowing capacity. As a result, loans are often easy to arrange and are given lower interest rates because of the improved debt structure on the balance sheet. Off-balance sheet financing is a technique often used by multinational businesses in order to secure additional loans on the worldwide loan market; and, b. is a method of obtaining funds through a long-term non-cancelable lease that is accounted for as an operating lease. The lease does not meet the criteria of a capital lease. This being the case, the present value of the lease obligation in not included in the lessees balance sheet.
WORK IN PROCESS is parts and subassemblies in the process of becoming completed finished goods.
SCRAP is material that is discarded as worthless or sold to be reused as parts; junk; a small unusable amount of something that is left over after the rest has been used or consumed.
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