Operating leases are preferred over finance leases because operating leases that exceed one year do not increase a company's debt ratio.

Name: Operating leases are preferred over finance leases because operating leases that exceed one year do not increase a company's debt ratio.
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Question

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Operating leases are recorded on the balance sheet, including those exceeding one year, due to accounting standards (such as IFRS 16 and ASC 842), which means they can affect a company's debt ratio similar to finance leases.

Operating Leases Are Preferred Over Finance Leases Because Operating Leases