Accounting / July 19, 2018 / Khloe Santiago
A capital lease is a lease in which the lessor only finances the leased asset, and all other rights of ownership transfer to the lessee. This results in the recordation of the asset as the lessee's property in its general ledger, as a fixed asset. The lessee can only record the interest portion of a capital lease payment as expense, as opposed to the amount of the entire lease payment in the case of the more common operating lease.
A reader recently asked about debt to cash flow ratios when analyzing a stock, but before addressing that question, perhaps it is best to start with a definition of this staple of fundamental analysis.
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