Use capital lease approach and instead of operating lease

Assignment Help Financial Management

Reference no: EM131548233

The Rooping Corp. has decided to lease an airplane on January 1, 2016. The company and its lessor have not yet decided the terms of the lease. Assume that the terms can be adjusted to permit Rooping to either capitalize the lease or record it as an operating lease. After assessing the effect of lease accounting policy on overall financial reporting, Rooping chooses to use capital lease approach, instead of operating lease.

(Required)

State (greater, smaller, or no change) & briefly explain the effect of the choosing capital lease over operating lease in 2016 financial reporting (first year of lease) on the following:

a. CF from operations

b. CF from financing

c. CF from investing

d. Debt-to-equity ratio

e. Interest coverage ratio or times interest earned (assume that interest coverage ratio is well above 1)

f. Operating income

g. Net income

h. Return on equity

Reference no: EM131548233

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