Canada Lease Co.is considering switching from using operating leases to financial leases.The expected impact on its stock price is:
A) the price should fall as the earnings per share will decline.
B) the price should not change as the ROA does not change.
C) the price should not change as the total cash flows will not change.
D) the price should rise as the cash flow from operations will rise.

Question

Quizplus · Accepted Answer

Switching from operating leases to financial leases does not change the total cash flows of the company, as it is primarily an accounting change. Therefore, the stock price should not be affected by this switch.