An operating lease is often referred to as:
A)Only statement I is correct
B)Only statement II is correct
C)Both statements I and II are correct
D)Neither statement I nor II is correct

Question

Quizplus · Accepted Answer

Statement I is correct because an operating lease is a type of lease where the lessee (the person leasing the asset) doesn't assume ownership of the asset and typically pays lower monthly payments than they would in a finance lease.

Statement II is also correct because operating leases are classified as off-balance-sheet financing, which means that the leased asset and associated liabilities are not recorded on the lessee's balance sheet. This can make the lessee's financial statements look stronger than they actually are.

An Operating Lease Is Often Referred to As