Instead of Increasing Its Long-Term Debt by Borrowing Money from a Bank

question 59

Multiple Choice

Instead of increasing its long-term debt by borrowing money from a bank to purchase new stereo equipment, Jay's Jams Inc.decides to lease the equipment on a long-term basis.How will the long-term debt ratio differ if the lease option is selected over the bank-debt option?

• A)the ratio will be lower under the leasing option.
• B)the ratio will be higher under the leasing option.
• C)the ratio will be the same regardless of the financing method selected.
• D)the ratio effects are unknown without the amount of the lease obligation.

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Definitions:

Position Power

The authority or influence conferred by one's rank or official standing within an organization.

Personal Power

The influence or authority an individual has over others, derived from personal attributes or skills, rather than formal position.

Shared Leadership

A dynamic, interactive influence process through which individuals in teams lead one another.

Influence Process

The methods or techniques used to affect the behavior or attitudes of individuals or groups.