Which one of the following statements concerning operating and ﬁnancial leases is correct?
A) A ﬁrm that is restricted from issuing more debt by a bond covenant, should enter a ﬁnancial lease rather than an operating lease.
B) An operating lease increases the debt-equity ratio of a ﬁrm.
C) An operating lease must be reported on the balance sheet of the lessee.
D) A ﬁnancial lease reduces the net equity in a ﬁrm.
E) A ﬁnancial lease increases the total debt of a ﬁrm.

Question

Quizplus · Accepted Answer

A financial lease is considered a form of debt and thus increases the total debt of a firm.

Which One of the Following Statements Concerning Operating and ﬁNancial