When Compared with a Company Recording an Asset as a Capital

question 107

Multiple Choice

When compared with a company recording an asset as a capital lease, the return-on-assets (ROA) and debt-to-equity for a company using an operating lease are: $$\begin{array} { l l l } & \text { ROA } & \text { Debt-to-equity } \\\hline\text { A) } & \text { Higher } & \text { Higher } \\\text { B) } & \text { Higher } & \text { Lower } \\\text { C) } & \text { Lower } & \text { Higher } \\\text { D) } & \text { Lower } & \text { Lower }\end{array}$$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Obligations

Duties or responsibilities imposed by law, contract, or moral duty that require a party to act or refrain from acting in a certain way.

Commercial Unit

Under the UCC, any unit of goods that is treated by commercial usage as a single whole. It may, for example, be a single article or a set of articles such as a dozen, bale, gross, or carload.

Accepted only

A condition or specification that only the accepted or approved items, proposals, or bids are considered, excluding all others.

Anticipatory Repudiation

The declaration by a party involved in a contract that they do not intend to fulfill their future obligations as agreed, even before the time to perform has arrived.