Capital budgeting decisions involve identifying and evaluating investment opportunities in long-term fixed assets such as machinery, land, buildings, and equipment. These decisions determine how a company should allocate its resources to maximize returns and achieve its strategic objectives. Capital structure decisions, on the other hand, involve determining the mix of equity and debt financing that a company should use to fund its operations and investments. This includes decisions on how much debt to take on, what type of debt instruments to use, and how to balance the risks and benefits of different financing options.

An operating lease is a type of lease agreement in which the lessee (the company leasing the asset) does not assume ownership of the leased asset. The lessor (the owner of the asset) retains ownership and is responsible for maintenance and other costs associated with the asset. Operating leases are typically used for short-term leases and do not usually involve a transfer of ownership rights at the end of the lease term.

A capital lease, on the other hand, is a lease agreement in which the lessee assumes ownership rights of the leased asset for a significant portion of its useful life. In a capital lease, the lessee is required to record the leased asset as an asset on its balance sheet and also record the lease payments as liabilities. This type of lease is typically used for long-term leases and is treated as a form of financing rather than a rental agreement. At the end of the lease term, the lessee may have the option to purchase the asset at a predetermined price.

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