From the lessee's point of view, which type of lease means that its debt to equity ratio will not be affected?

Question

Quizplus · Accepted Answer

In an operating lease, the leased equipment does not appear on the lessee's balance sheet, and therefore, its debt to equity ratio is not affected. This is because the lessee is only paying for the use of the equipment during the lease term, and they do not take ownership of the equipment at the end of the lease. On the other hand, in finance leases, the leased equipment appears on the lessee's balance sheet, and the lease payments are treated as debt, which affects the debt to equity ratio. Sales-type and leveraged leases are types of finance leases and, therefore, affect the debt to equity ratio.

From the Lessee's Point of View, Which Type of Lease