Economics · Corporate Finance
Under modern accounting standards (like Ind AS 116 / IFRS 16), how does acquiring an asset through a lease affect the debt-to-equity ratio of a lessee?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It has no impact because leased assets are kept off-balance sheet.
- 2It reduces the debt-to-equity ratio by decreasing total liabilities.
- 3It decreases the debt-to-equity ratio by increasing total equity.
- 4It generally increases the debt-to-equity ratio due to the recognition of a lease liability.✓
Correct answer
It generally increases the debt-to-equity ratio due to the recognition of a lease liability.
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