1. Calculate the ratio of Total Liabilities to Total Assets (TL/TA). Is there anything unusual about this ratio? Explain.

2. How many American Airlines aircraft are operated under operating leases and how many operated under capital leases? Why does American Airlines appear to prefer operating lease contracts to capital lease contracts?

3. What interest rate does American use in capitalizing capital lease payments?

4. What is the present value of the operating lease payments? Use the rate used by American Airlines in capitalizing capital lease payments.

5. Calculate the ratio of Total Liabilities to Total Assets after capitalizing operating leases.

6. Describe the effect of the capitalization of operating leases on the TL/TA ratio? Is there anything unusual about this effect? Explain.