Debt Displacement Is Associated with Leases Because

question 23

Multiple Choice

Debt displacement is associated with leases because:

• A) all assets not purchased with equity use debt financing.
• B) debt is always a cheaper source of financing and is lost as leasing is used.
• C) ICA3065 and the CCRA mandate debt displacement.
• D) lease financing is all debt and causes an imbalance in the optimal debt to equity ratio which reduces future debt financing.

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Definitions:

Balance Sheet Columns

Sections within the balance sheet that categorize assets, liabilities, and equity accounts to display a company's financial position at a specific point in time.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, which is reinvested in the business.

Annual Revenues

The total amount of money received by a company for goods sold or services provided during a fiscal year.