An analyst should consider whether a company acquired assets through a capital lease or an operating lease because a company may structure:
A)leases to be treated like capital leases to enhance its leverage ratios.
B)leases to be treated like capital leases to enhance its cash flow.
C)leases to be treated like operating leases to lower its debt to equity ratio.
D)leases to be treated like operating leases to enhance its cash flow.

Question

Quizplus · Accepted Answer

If a company structures leases to be treated like operating leases, it will not be recorded as a liability on the balance sheet. This will result in a lower debt to equity ratio for the company.

An Analyst Should Consider Whether a Company Acquired Assets Through