Constructive capitalization occurs when analysts treat capital leases as operating leases and approximate what balance sheet numbers would have been had the leases not been capitalized.

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Constructive capitalization refers to the process where analysts adjust the financial statements to treat operating leases as if they were capital leases, not the other way around. This is done to better reflect the company's liabilities and assets by including the present value of lease obligations.

Constructive Capitalization Occurs When Analysts Treat Capital Leases as Operating