Hatfield Industries is a large manufacturing conglomerate based in the United States with annual sales in excess of $300 million. Hatfield is currently under investigation by the Securities and Exchange Commission (SEC) for accounting irregularities and possible legal violations in the presentation of the company's financial statements. A due-diligence team from the SEC has been sent to Hatfield's corporate headquarters for an audit. The team finds that: - Management has been involved in ongoing negotiations with the local labor union. Labor officials are seeking increased wages and pension benefits, which Hatfield's management states is not possible at this time due to decreased profitability and a tight cash flow situation. Labor officials have accused Hatfield's management of manipulating the company's financial statements to justify not granting any wage concessions. - Equipment obtained over the past several years has been classified as operating leases, although past acquisitions of similar equipment were nearly always classified as capital leases. Capital leases for this type of equipment are the industry norm. The SEC wants Hatfield's management to provide justification for this apparent deviation from "normal" accounting practices. - Inventory on Hatfield's books has been increasing in comparison to sales growth. Management credits improved operating efficiencies that have boosted overall production. The SEC wonders whether Hatfield may have manipulated its inventory accounts. The SEC due-diligence team is not necessarily searching for evidence of fraud but of possible manipulation of accounting standards to mislead shareholders and other interested parties. Initial review of Hatfield's financial statements indicates that, at a minimum, certain practices have resulted in low-quality earnings. Hatfield has begun recording all new equipment leases on its books as operating leases, a change from its consistent past use of capital leases, in which the present value of lease payments is classified as a debt obligation. What is the most likely motivation behind Hatfield's change in accounting methodology? Required: Hatfield is attempting to: improve its leverage ratios and reduce its perceived leverage. reduce its cost of goods sold and increase its profitability. increase its operating margins relative to industry