If a lessee enters into a finance lease rather than an operating lease, it can expect to have a:
 
A. higher return on assets.
 
B. higher debt-to-equity ratio.
 
C. lower debt-to-equity ratio.
 
solution：b
 
Leasing the asset with an operating lease avoids recognition of the debt on the lessee’s balance sheet. Having fewer assets and liabilities on the balance sheet than would exist if the assets were purchased increases profitability ratios (e.g., return on assets) and decreases leverage ratios (e.g., debt-to-equity ratio). In the case of a finance lease, the assets are reported on the balance sheet and are depreciated.

 
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