A Capital Lease, as Compared to an Operating Lease, Has

question 33

Multiple Choice

A capital lease, as compared to an operating lease, has a higher likelihood which of the following?

• A)default payment
• B)violation of loan covenants
• C)stronger ratios
• D)higher overall expenses

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Definitions:

Coupon Payment

A periodic interest payment made to bondholders during the life of a bond.

Income Bond

A type of bond that only pays interest if the issuer has sufficient earnings to cover the interest payments.

Protective Covenants

Conditions written into financial agreements that the issuer must follow, such as restrictions on issuing more debt or making capital distributions.

Bondholders

Individuals or entities that own bonds issued by corporations or governments, entitling them to receive fixed interest payments and the return of the principal amount at maturity.