An operating lease is a lease which allows borrowing party to keep its leased asset out of its accounting balance sheet, and pay rent on it. The leased asset is not capitalised.
An operating lease lets the borrowing entity keep its debt equity ratio low, and hence, favourable in the eyes of investors. Assets, if capitalised even when leased, increases a company’s debt.
Financial lease capitalises the leased asset and recognises it as a liability.