Which one of these is considered to be the best reason for obtaining a capital lease?
A) To benefit from the implicit interest rate of a lease
B) To extend payments over a period of time
C) To avoid the restrictive covenants often found in loan agreements
D) To reduce the liabilities shown on the firm's balance sheet
E) To obtain 100 percent financing

Question

Quizplus · Accepted Answer

Capital leases can be attractive because they often allow companies to avoid the restrictive covenants that are commonly found in loan agreements. These covenants can limit a company's operational flexibility, so avoiding them can be a significant advantage.

Which One of These Is Considered to Be the Best