Common practice in HGB accounting is that sold receivables no longer appear on the company’s balance sheet. The sale of receivables to Tradewind initially represents an exchange of assets (receivables for cash); the balance sheet total is reduced as a result of the use of funds on the liabilities side. Since the reported equity remains constant, but the balance sheet total has decreased, the equity ratio increases. The equity ratio, in turn, is a key component in the balance sheet rating.