alleryStart learning →Under operating lease treatment, what happens to leverage ratios?
AThey stay exact
BThey are doubled
CThey are overstated
DThey are understated
Answer & Solution
Correct answer: D. They are understated
Lease obligations are not recognised, so debt is left out and leverage ratios look lower than they should.
Keep practising Sources of Finance
Browse all Sources of Finance questions for CA Inter, or explore more Financial Management topics.
Related questions
What is the usual outcome at the end of a finance lease, as in hire purchase?Under the IFRS approach, when is a lease a finance lease?How does capitalising a finance lease affect the balance sheet?Who is typically the legal owner of the asset during a finance lease?Historically, how have many IPOs been priced relative to market demand?In a Dutch auction IPO, what do all successful bidders pay?A greenshoe option usually lets underwriters raise the offering by up to what percentage?What is the fee retained by underwriters out of IPO proceeds called?