Which of the following explains why reducing leverage through off-balance sheet financing is not a valid argument for leasing?
A) Whether they appear on the balance sheet or not, lease commitments are liabilities for the firm.
B) For most large corporations, the amount of leverage the firm can obtain through a lease is unlikely to exceed the amount of leverage the firm can obtain through a loan.
C) Some companies may place limits on the dollar amounts a manager can invest over a certain period.
D) All of the above are reasons why reducing leverage through off-balance sheet financing is not a valid argument for leasing.

Question

Quizplus · Accepted Answer

Regardless of whether lease commitments appear on the balance sheet, they are still considered liabilities for the firm, and therefore do not truly reduce leverage through off-balance sheet financing. Option B is not a valid argument against leasing, while option C does not relate to the question.

Which of the Following Explains Why Reducing Leverage Through Off-Balance