Which of the Following Factors Will Classify a Lease as a Capital

question 134

True/False

Which of the following factors will classify a lease as a capital lease for accounting purposes?

If the lease transfers ownership of the asset to the lessee by the end of the lease, this will classify the lease as a capital lease for accounting purposes.

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Definitions:

Pro Forma Statements

Financial statements that project the future financial position of a company, based on current data and assumptions about future activity.

Payout Ratio

The proportion of earnings paid out as dividends to shareholders, often expressed as a percentage of the company's total net income.

Short-term Debt

Financial obligations that are due to be paid within one year, often used as part of a company's operational financing strategy.

Capital Intensity Ratio

A measure of how much capital is required to produce one unit of output, indicating the extent of capital employed in production.