Financial Statement Analysis of Leases
Analyzing Lease Obligations
Lease accounting significantly affects leverage, asset turnover, and profitability ratios because most leases now appear on the balance sheet. Analysts evaluate lease obligations alongside other financing arrangements when assessing solvency.
Tip
Bringing leases onto the balance sheet improves comparability between companies that lease assets and those that purchase them.
Summary
Recognizing lease assets and liabilities affects many key financial ratios used by investors and creditors.