From the lessee's viewpoint, all of the following are advantages of leasing except that
A)if a lease is recorded as a capital lease, the calculated rate of return on the total assets ratio and the current ratio will be improved
B)a lease agreement may reduce the risk of obsolescence for a lessee
C)in many cases, an asset may be leased without requiring the lessee to make a substantial down payment
D)the lessee may be able to claim larger tax deductions through leasing the asset than if the asset were purchased

Question

Quizplus · Accepted Answer

Leasing an asset as a capital lease typically results in the asset and the corresponding liability being added to the lessee's balance sheet, which can lower the return on total assets ratio due to the increase in total assets without a proportional increase in net income. Similarly, the current ratio may be adversely affected as the current portion of the lease liability is counted as a current liability, potentially reducing the ratio if current assets do not increase proportionately.

From the Lessee's Viewpoint, All of the Following Are Advantages