Suppose the Canadian National Railway Company's (CN) total assets in a recent year were \(\$ 24,004\) million and its total liabilities were \(\$ 14,180\) million. That year, \(\mathrm{CN}\) reported operating lease commitments for its locomotives, freight cars, and equipment totaling \(\$ 740\) million. If these assets had been recorded as capital leases, assume that Analyze solvency.


assets and liabilities would have risen by approximately \(\$ 740\) million.

(a) Calculate \(\mathrm{CN}^{\prime}\) s debt to assets ratio, first using the figures reported, and then after increasing assets and liabilities for the unrecorded operating leases.

(b) Discuss the potential effect of these operating leases on your assessment of CN's solvency.