Operating Lease vs. Capital Lease
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We have discussed the differences
between capital lease and operating lease. This article tests if you understand
the impact of the balance sheet and income statement items and financial
ratios. Please answer by putting “Higher”, “Same”, or
“Lower” in the following table and then compare your answers with
the answer table.
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Operating Lease |
Capital Lease |
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Assets |
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Liabilities |
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Net income (1st Year) |
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EBIT |
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CFO |
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CFF |
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Working Capital |
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ROE (1st Year) |
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The followings are the answers:
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Operating Lease |
Capital Lease |
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Assets |
Lower |
Higher |
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Liabilities |
Lower |
Higher |
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Net income (1st year) |
Higher |
Lower |
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EBIT |
Lower |
Higher |
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CFO |
Lower |
Higher |
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CFF |
Higher |
Lower |
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Working Capital |
Higher |
Lower |
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ROE (1st year) |
Higher |
Lower |
August 24th, 2007 in
CFA - LEVEL 1, Financial Statements Posted by Editor