1. What is a special purpose entity?

2. What is meant when a special purpose entity is called bankruptcy remote?

3. What is the primary benefit most likely obtained by the sponsor of a special purpose entity when the sponsor transfers assets to a special purpose entity?

4. One motive for transferring assets to a special purpose entity is to move assets "off-balance-sheet." What are the primary benefits for operating companies in obtaining off-balance-sheet treatment for assets?

5. Refer to our discussion of Ford Motor Credit LLC (FMC) in the Special Purpose Entity section of the chapter. Why does FMC's use of special purpose entities suggest that there are legitimate financing benefits to transferring assets to special purpose entities?