Lease obligations are included in certain leverage ratios because leases:
A) require the payment of interest.
B) represent long-term fixed obligations.
C) must be financed through a bank.
D) are a measure of efficiency, just like debt.

Question

Quizplus · Accepted Answer

Leases represent long-term fixed obligations that must be paid over an extended period of time. This makes them similar to debt in terms of the impact on the company's financial position and ability to repay other creditors. Including lease obligations in certain leverage ratios provides a more accurate picture of the company's overall debt burden and financial health. Leases do not require payment of interest, do not need to be financed through a bank, and are not a measure of efficiency like debt.

Lease Obligations Are Included in Certain Leverage Ratios Because Leases