To consider the financial statement effects of leasing versus purchasing an asset, review the following case of Scorecard Corporation

Scorecard Corporation needs equipment that will cost the company $800. Scorecard Corporation is considering to either purchase the equipment by borrowing $800 from a local bank or leasing the equipment. Assume that the lease will be structured as an operating lease.

Some data from Scorecard Corporations current balance sheet prior to the lease or purchase of the equipment are:

Balance Sheet Data
(Dollars)
Current assets	$4,200	Debt	$2,400
Net fixed assets	1,800	Equity	3,600
Total assets	$6,000	Total claims	$6,000

1.	The companys current debt ratio is .
2.	If the company purchases the equipment by taking a loan, the total debt in the balance sheet will , and the debt ratio will change to .
3.	If the company leases the equipment, the companys debt ratio will because the lease is not capitalized.
4.	In this case, the companys financial risk will be under a lease agreement as compared to the financial risk in purchasing the equipment by taking a loan.
5.	However, if the lease is capitalized, the financial risk under the lease agreement will be as compared to the risk in buying the equipment.