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An advantage of an operating lease is that is does not add a liability or an...

An advantage of an operating lease is that is does not add a liability or an asset to the lessee’s balance sheet, thereby not affecting certain liquidity and financial leverage ratios.

Select one:

True

False

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Answer #1

Ans:

True; Yes operating lease does not add a liability or an asset to the lessee’s balance sheet, thereby not affecting certain liquidity and financial leverage ratios. operating lease is where the lessee use the asset and pay periodical lease rent to lessor for use of such asset. The risks and rewards in operating lease remains with the lessor only. So it does not add any asset or liability to the balance sheet.

So correct answer is True.

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