Treating a lease as an operating lease rather than a capital lease results in an increase in the asset turnover ratio.

Question

Quizplus · Accepted Answer

This is because in an operating lease, the leased asset is not recorded on the lessee's balance sheet and only the lease payments are treated as operating expenses. This reduces the value of total assets and increases the asset turnover ratio, which is calculated by dividing the revenue by the average total assets.

Treating a Lease as an Operating Lease Rather Than a Capital