Which of the following is a common characteristic of an operating lease?

An operating lease is characterized by having shorter terms compared to a capital lease, which is often a significant aspect of its nature. Operating leases are typically used for assets that businesses need for a limited period, allowing flexibility in their equipment usage without long-term commitments. This is beneficial for companies that may need to adapt to changing technology or business needs.

In contrast, capital leases (or finance leases) often extend for the majority of the asset's useful life and are structured more like a purchase, where ownership is effectively transferred to the lessee at the end of the lease term. The shorter duration of operating leases means that they are generally not recorded on the balance sheet as assets in the same way capital leases are, which can also affect a company's financial ratios, potentially presenting a more favorable financial position.

The other characteristics associated with operating leases, such as showing up on the balance sheet or being more expensive than capital leases, do not apply in the same way, as operating leases are typically off-balance-sheet transactions and can be more economical under certain circumstances depending on the use case and financial structure of the business. Therefore, the shorter terms of operating leases fundamentally differentiate them from their capital lease counterparts.