Which of the Following Is CORRECT

question 31

Multiple Choice

Which of the following is CORRECT?

• A) Firms that use "off-balance-sheet" financing,such as leasing,would show lower debt ratios if the effects of their leases were reflected in their financial statements.
• B) Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure,in an amount sufficient to support the lease payment obligation.
• C) The fixed charges associated with a lease can be as high as,but never greater than,the fixed payments associated with a loan.
• D) Capital,or financial,leases generally provide for maintenance by the lessor.
• E) A key difference between a capital lease and an operating lease is that with a capital lease,the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds,whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment.

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