1. Failure to appropriately capitalize leased assets and liabilities results in a number of distortions in the ROE disaggregation analysis. Which of the following is not a distortion?

a. Net operating asset turnover is overstated due to the non-reporting of lease assets.

b. Reported total expense is lower in the early years of a capital lease relative to an operating lease, but is higher in later years.

c. Financial leverage is understated.

d. Total assets are understated.

e. All of the above are distortions.