What Is the Effect of Classifying a Lease as an Operating

question 26

Short Answer

What is the effect of classifying a lease as an operating lease, as opposed to as a finance lease, on the debt to equity ratio and times-interest-earned ratio? $\begin{array}{lll}& \text { Debt to equity ratio}& \text {Times-interest-earned ratio }\\\hline\text { a. } & \text { Overstated } & \text {Overstated } \\\text { b. } & \text { Overstated } & \text { Understated } \\\text { c. } & \text { Understated } & \text { Overstated } \\\text { d. } & \text { Understated } & \text { Understated }\end{array}$