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:

Alternative Technologies

Refers to various options available for achieving a similar goal, especially in the context of energy sources, manufacturing processes, or digital solutions.

Labor Costs

The total expense incurred by employers for the wages, benefits, and taxes associated with the workforce.

Capital-Intensive

A production process that requires a higher ratio of capital (machinery, equipment) to labor.

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