单选题

Compared with classifying a lease as a financing lease, if a lessee reports the lease as an operating lease, it will most likely result in:

A、 a higher debt-to-equity ratio.
B、 a lower return on assets.
C、 lower cash from operations.

【正确答案】 C

【答案解析】

The cash from operations is lower if the lease is classified as an operating lease because the full lease payment is shown as an operating cash outflow. If it is classified as a financing lease, only the portion of the lease payment relating to interest expense reduces the operating cash flow and the portion of the lease payment that reduces the lease liability is classified as a financing cash flow. Therefore, the lessee's cash from operations tends to be lower under operating leases.