Difference in Operating Lease and Capital Lease
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Tiffany & Co., one of the world's most luxurious jewelers, classifies leases under "operating lease" expense. What affect would classifying leases as "capital leases" have on their bottom-line, return on equity, earnings per share, and balance sheet ratios? Would it change them? How or why?
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This solution is provided in a Word document and discusses the lease expenses. The expert determines what affects classifying leases as capital leases on their bottom-line.
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How would changing from operating lease to capital lease effect a company?
Tiffany & Co., one of the world's most luxurious jewelers, classifies leases under "operating lease" expense. What affect would classifying leases as "capital leases" have on their bottom-line, return on equity, earnings per share, and balance sheet ratios? Would it change them? How or why?
Answer
If a company classifies a lease as an operating lease, it has to expense the amount of annual rentals resulting in reduction in profits. However, if a company ...
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