The Effect of Lease Data on the Predictive Ability of Financial Ratios.

Key Points

• This research aims to assess how capitalization versus footnote disclosure of long-term leases affects the predictive power of financial ratios in bankruptcy scenarios.
• Analyzed the impact of capitalization on financial ratios
• Defined and described key financial ratios related to bankruptcy
• Employed statistical methods to test predictive ability of ratios
• Investigated limitations and challenges in existing research
• Capitalization significantly enhances the predictive ability of financial ratios compared to footnote disclosure
• Established tools for financial statement analysis are affected by lease data
• Insights indicate that financial analysts should consider lease data for better forecasting of financial distress