Why Do Lessees Tend to Prefer the Operating Lease Method

question 28

Multiple Choice

Why do lessees tend to prefer the operating lease method to the capital lease method?

• A)The capital lease method results in larger long-term debt and debt-equity ratios during the life of a lease than the operating lease method.
• B)A larger debt ratio makes a firm appear more risky.
• C)The operating lease method recognizes expense more slowly over the life of the lease than the capital lease method.
• D)all of the above
• E)none of the above

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Definitions:

Factual Information

Data or details that are true, objective, and can be verified or proven.

Accommodation

Adjusting one’s own behavior or thoughts to be more compatible with others or to deal effectively with new situations.

Little Importance

A term used to denote items, issues, or topics that are considered to have minimal significance or priority.

Avoidance

A strategy or behavior aimed at steering clear of certain situations, conflicts, or responsibilities due to perceived potential negative outcomes.