The Effect of Off-Balance Sheet Financing on Profitability and Leverage Ratios

In this paper, the effect of off-balance sheet financing on profitability and leverage ratios have been studied. In fact, this study tries to answer to this question that "what effects can off-balance sheet financing (operating lease) has on profitability and leverage ratios in TSE?" off-balance sheet financing means investing or increasing firm's capital (increase operating activities) according to law and generally accepted accounting principles (GAAP) that all or part of that financing is not reported on balance sheet; profitability and leverage ratios evaluate firm's efficiency and ability to use of resources by sales revenue and investment. In this study deductive-inductive method is used, so hypotheses are stated in deductive method and conclusions are made using inductive method. So that, Firm's profitability and leverage ratios before and after off-balance sheet financing, and firms with and without off-balance sheet financing are compared. Results indicate that, from 2003-2010; off-balance sheet financing hadn't increased profitability and leverage ratios.