[Verse 1] Sarah's coffee shop needs brewing machines today Two pathways gleaming, which will she display? Operating lease means monthly rental fees But finance lease transfers ownership keys Her balance sheet transforms with every choice Let's decode which metrics raise their voice [Chorus] Operating keeps the asset off your books Finance lease capitalizes, changes how it looks Debt-to-equity climbs when you capitalize Asset turnover drops before your eyes Operating, finance, ratios will dance Know the difference, give your metrics chance [Verse 2] Operating lease shows rental as expense Straight-line monthly hits, nothing too intense But finance lease creates a asset pair Depreciation and interest everywhere The present value lands upon your sheet Making leverage ratios compete [Chorus] Operating keeps the asset off your books Finance lease capitalizes, changes how it looks Debt-to-equity climbs when you capitalize Asset turnover drops before your eyes Operating, finance, ratios will dance Know the difference, give your metrics chance [Bridge] Current ratio shifts when lease liability splits Short-term portion hits your working capital bits Return on assets falls when assets grow While interest coverage feels the payment flow Analysts adjust to see beneath The accounting treatment's hidden wreath [Verse 3] EBITDA appears much higher when Operating leases mask the payment drain But finance lease shows depreciation clear Interest expense makes the picture sincere Comparability matters in the end Which accounting story will you send? [Chorus] Operating keeps the asset off your books Finance lease capitalizes, changes how it looks Debt-to-equity climbs when you capitalize Asset turnover drops before your eyes Operating, finance, ratios will dance Know the difference, give your metrics chance [Outro] When analyzing firms, remember this refrain Different lease accounting drives ratio strain Peek behind the treatment, normalize the view Financial truth emerges crystal through
← Lease Accounting: Right-of-Use Assets and Liabilities | Deferred Tax Assets and Liabilities →