If a Company Makes Extensive Use of Operating Leases to fiNance

Multiple Choice

If a company makes extensive use of operating leases to finance assets, what is the effect on the debt-to-equity ratio?

A) The debt-to-equity ratio would not be affected.
B) The effect depends on whether the ratio is above 1 or not.
C) The debt-to-equity ratio would be overstated.
D) The debt-to-equity ratio would be understated.