Since operating leases result in the receipt of services from an asset without increasing the assets or liabilities on the firm's balance sheet, leasing may result in misleading financial ratios.

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Operating leases are off-balance sheet financing, which means a company can receive services from an asset without reporting the asset or related liability on its balance sheet. This can make a company's financial ratios appear better than they actually are, making it a potential source of financial misrepresentation.

Since Operating Leases Result in the Receipt of Services from an Asset