medium · Principles of Finance time-value-of-money
Under the new lease accounting standard (ASC 842), how does the classification of a lease as an 'operating lease' instead of a 'finance lease' typically affect the firm's EBITDA and Interest Expense?
- Operating leases have no impact on the balance sheet, unlike finance leases.
- Both classifications result in identical EBITDA but different Net Income figures.
- Operating leases result in lower EBITDA and lower Interest Expense compared to finance leases.
- Operating leases result in higher EBITDA because the payments are not considered an operating expense.
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