How did the term ‘window dressing’ originate? — Textile and readymade shops dress mannequins (models of human bodies) with attractive clothing they sell and place them in display windows. Likewise, mutual funds and banks add more temporary assets and liabilities on year ends to ensure their balance sheets remain attractive to the public, especially investors. As their intention is to dress up their balance sheets to make them attractive like a shopper does to the mannequins, the term ‘window dressing’ is used to mean artificial inflation of assets which will wear off after the year end.
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