Which One of the Following Statements Concerning Operating and Financial

question 122

Multiple Choice

Which one of the following statements concerning operating and financial leases is correct?

• A) A firm that is restricted from issuing more debt by a bond covenant, should enter a financial lease rather than an operating lease.
• B) An operating lease increases the debt-equity ratio of a firm.
• C) An operating lease must be reported on the balance sheet of the lessee.
• D) A financial lease reduces the net equity in a firm.
• E) A financial lease increases the total debt of a firm.

---

Definitions:

Oligopoly

The market structure that exists when there are very few businesses selling a product.

Economic Depression

A severe and prolonged downturn in economic activity characterized by significant decline in GDP, high unemployment, and deflation.