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C is wrong A firm that expenses the cost is under an operating lease. Thus in the earlier years your profit margin and return on assets/equity will be higher. for operating lease. Answer B is wrong becaseu Cash flow from operations will be different under the two metheds One will be overstated and one will be understated. The thing is C is also wrong.

The key to understanding operating vs cpaital is that in the earlier years capitla lease expenses are greater than operating expenses

Interest expense + Depreciation expense > rent expense.

Is there a typO here?



Edited 2 time(s). Last edit at Wednesday, June 3, 2009 at 11:50AM by chung.da.neu.