A company receiving leased equipment would prefer
A company receiving leased equipment would prefer a finance lease to an operating lease when it:
A.wishes to show a higher cash flow from operations.
B.desires a lower debt-to-equity ratio.
C.has a low marginal tax rate.
参考解答
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2024-10-27 13:09:51
Ans:A.
Under an operating lease, the entire lease payment is reported as operating cash outflow.A finance lease allocates the outflow between both operating ad financing cash outflows, with only the interest portion of the lease payment treated as an operating cash outflow.
B is incorrect.A company’s leverage ratios will be higher under a finance lease arrangement.The finance lease method creates a lease obligation liability.An operating lease is preferred if a firm wants to keep debt off of its balance sheet.
C is incorrect.Companies with higher marginal tax rates prefer finance leases, as expenses are higher in the early period of the lease.A low marginal tax rate does not result in a finance lease preference.
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