Which of the Following Statements Is Most CORRECT

question 16

Multiple Choice

Which of the following statements is most CORRECT?

• A) 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.
• B) the fixed charges associated with a lease can be as high as, but never greater than, the fixed payments associated with a loan.
• C) capital, or financial, leases generally provide for maintenance by the lessor.
• D) 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.
• E) 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.

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Definitions:

Avocados

A nutrient-dense fruit known for its creamy texture and health benefits, including high levels of potassium and healthy fats.

Bananas

A tropical, crescent-shaped, yellow fruit that is soft and sweet when ripe, widely consumed and grown in humid regions around the world.

Aesthetic Importance

The value or significance of something based on its beauty or emotional impact, often related to the arts or nature.

Wildflowers

Wild plants that grow naturally without intentional human planting or cultivation.