FSA: volumn 2, page 107 106, increase, opposite, appears, finance

RMontgomery

the statement 4th to the last one:
“When a lessee reportes a lease as an operating lease rather than a finance lease, it usually appears more profitable in early years of the lease and less so later, and it appears more solvent over the whole period”
why i thik the opposite is corret? if check the statement in page 106, it is capitalize expense will increase the profit during capializing year….. etc.
thanks.

cfalevel2011

remember on the income statement which measures profit  capital leases have depreciation and interest paid. in the early years interest + depreciation operating lease payment. this reduces profit.
capital expenses and capital leases are different. capital expenses are expensed slowly over a period of time and create assets, increasing profit in the year of capitalization.