Firms That Use fiNancial Leases Must Consider Their Debt-To-Equity Ratios

question 25

Multiple Choice

Firms that use financial leases must consider their debt-to-equity ratios as inadequate measures of financial leverage because:

• A)lenders are concerned about the firm's total liabilities and related cash flow.
• B)debt displacement occurs with leasing.
• C)less future debt can be raised for a growing firm when a lease is used.
• D)the liability equals to the present value of all future lease payments.
• E)All of the above.

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Definitions:

Conform

To behave or perform in a manner that aligns with set norms, regulations, or legal requirements.

Express Warranty

A clear and definite promise made by a seller about the quality or functionality of a product.

Proper Quality

refers to the standard of goods or services that meets the expectations and requirements set by regulatory bodies, industry standards, or customer expectations.

Merchants

Individuals or businesses engaged in the sale of goods and services, especially in the retail sector.