Debt-rating agencies take financial and operating leases into account because:
A)they realize that lessees need that information for their records.
B)the agencies are required by law to do so.
C)the book income of the lessee is improved by including lease obligations.
D)the book income will be lower, all things equal, if lease obligations show as a balance sheet item.

Question

Quizplus · Accepted Answer

Debt-rating agencies take financial and operating leases into account because they affect the lessee's book income. If lease obligations show as a balance sheet item, the book income will be lower, all things equal. Therefore, debt-rating agencies need to consider the impact of leases on a company's financial position to accurately assess its creditworthiness.

Debt-Rating Agencies Take Financial and Operating Leases into Account Because