Instead of increasing its long-term debt by borrowing money to purchase new stereo equipment,Jay's Jams Inc.decides to lease the equipment.How does this affect its long-term debt ratio?
A) It will decrease.
B) It will increase.
C) It will remain unchanged.
D) The effects are unknown without the amount of the lease obligation.

Question

Quizplus · Accepted Answer

Leasing does not affect long-term debt ratio because it is not considered debt.

Instead of Increasing Its Long-Term Debt by Borrowing Money to Purchase