An Analyst Should Consider Whether a Company Acquired Assets Through

question 66

Multiple Choice

An analyst should consider whether a company acquired assets through a capital lease or an operating lease because a company may structure:

• A)leases to be treated like capital leases to enhance its leverage ratios.
• B)leases to be treated like capital leases to enhance its cash flow.
• C)leases to be treated like operating leases to lower its debt to equity ratio.
• D)leases to be treated like operating leases to enhance its cash flow.

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Definitions:

Tax Rates

The percentages at which income, purchases, or other financial transactions are taxed by governments.

Saving

Disposable income not spent for consumer goods; equal to disposable income minus personal consumption expenditures.

Deregulation

The process of reducing or eliminating government power in a particular industry, usually to create more competition within the industry.

Transactional Motive

relates to the need to hold cash for the purpose of conducting day-to-day transactions.