Crown Point Inc. is in the process of arranging a long-term lease for the company's equipment. The

Question:

Crown Point Inc. is in the process of arranging a long-term lease for the company's equipment. The company has dismissed the option of borrowing money from the bank and buying the equipment and is now trying to decide between structuring the lease as an operating lease or a finance lease. Lise Ranier, the company's CEO, strongly urges the controller to structure the lease as an operating lease. "That way," she says, "we won't add debt that might create problems with our existing debt covenants at the bank."
Instructions
(a) Who are the in this situation?
(b) Explain generally how an operating lease affects the of a company, compared with a finance lease.
(c) Is it unethical to deliberately structure a lease as an operating lease just to keep the debt off the
(d) Do you think analysts will be able to distinguish among the financial impacts of purchasing equipment by borrowing from a bank compared with leasing it on an operating lease or a finance lease?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...