For a lessee,the current ratio deteriorates with a capitalized lease.

Question

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The current ratio is a liquidity ratio that measures a company's ability to pay its short-term obligations. In a capitalized lease, the lessee is required to record both an asset and a liability on its balance sheet, which may increase the total amount of debt and decrease the amount of current assets. This could result in a decrease in the current ratio, indicating a deterioration in liquidity.

For a Lessee,the Current Ratio Deteriorates with a Capitalized Lease