Because finance leases increase the apparent leverage on the firm's balance sheet,firms sometimes prefer to have a lease categorized as an operating lease to keep it off the balance sheet.

Question

Quizplus · Accepted Answer

This statement is true. Finance leases are recorded as liabilities on the balance sheet, which can increase the firm's leverage ratio. Therefore, some firms may prefer to classify their leases as operating leases, which are not recorded as liabilities on the balance sheet.

Because Finance Leases Increase the Apparent Leverage on the Firm's