Debt displacement is associated with leases because:
A) all assets not purchased with equity use debt financing.
B) debt is always a cheaper source of financing and is lost as leasing is used.
C) ICA3065 and the CRA mandate debt displacement.
D) lease financing is all debt and causes an imbalance in the optimal debt to equity ratio which reduces future debt financing.

Question

Quizplus · Accepted Answer

Lease financing is considered a form of debt because it obligates the company to make future payments, similar to loan repayments. This can affect the company's debt-to-equity ratio, potentially limiting its ability to secure additional debt financing in the future due to an imbalance or over-leverage.

Debt Displacement Is Associated with Leases Because