Bonuses for your entire department are based on financial ratios for your firm. Your firm is undertaking a large equipment lease and your boss asks for your recommendation as to what would be the best way to classify the equipment lease. You recommend:

Question

Quizplus · Accepted Answer

Classifying the equipment lease as an operating lease would generally keep the liability off the company's balance sheet, potentially improving financial ratios such as the debt-to-equity ratio, which could positively impact bonuses if they are tied to these metrics.

Bonuses for Your Entire Department Are Based on Financial Ratios