Off-balance-sheet financing refers to financial arrangements that do not appear on a company's balance sheet. This can include leases, joint ventures, or special purpose entities that allow companies to keep certain liabilities and assets off their financial statements. By doing so, companies can improve their financial ratios and present a stronger financial position to investors and creditors. This type of financing is often used to manage risk and maintain flexibility. However, it can also obscure the true financial health of a company, making it important for investors to understand these arrangements when evaluating a business's overall performance and risk profile.