Which Condition Would Result in an Operating Lease

question 43

Multiple Choice

Which condition would result in an operating lease?

• A)Risk of breakage is with the lessee.
• B)Reward of high resale value is with the lessor.
• C)Risk of change in rental rates is with the lessee.
• D)Reward of longer than expected useful life for the leased asset is with the lessee.

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Definitions:

Operating Income

The profit realized from a company's everyday core business operations, excluding deductions of interest and taxes.

Cash Payback Period

The duration needed for an investment to generate cash flows sufficient to recover the initial cost of the investment.

Net Cash Inflow

Net cash inflow refers to the difference between the cash inflows and outflows within a given period, indicating the net change in cash and cash equivalents resulting from a company's activities.

Cash Payback Period

The time it takes for an investment to generate cash flow sufficient to recover its initial cost.