Lessees Prefer to Account for Their Leases as Operating Leases

question 20

Multiple Choice

Lessees prefer to account for their leases as operating leases because:

• A)This decreases the amount of liability reported
• B)This increases their debt to total equity ratio
• C)This decreases the income tax expense.
• D)This increases the amount of total assets.

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Definitions:

Elastic Demand

A situation where demand for a product or service significantly changes in response to changes in price.

Inelastic Demand

A situation where the demand for a product or service does not significantly change in response to price changes, indicating consumers' strong need or preference for the product.

Sensitive to Price

Sensitive to price describes a situation where demand for a product is highly affected by changes in its price.

Maximize Profit

The primary goal of businesses to achieve the highest possible profit margin by optimizing revenue while minimizing costs.