Operating vs Finance Lease CFO
Operating lease - rent expense all CFO payment large outflow
Finance Lease - payment split interest expense CFO (small) principal paid CFF (large)
When asked " recognition of a lease as an operating lease opposed to direct financing lease by the lessor will most likely result in a higher..?
a) net income
b) total debt
c) CFO
answers C . Having hard time in exam questions if its asking is the CFO outflow higher (which c is the answer in this case) or is total remaining CFO larger which it would be for a finance lease bc the CFO outflow is very small. Anyone help me differentiate between the 2?
Thanks |