Which of the Following Is Most CORRECT

question 43

Multiple Choice

Which of the following is most CORRECT?

• A)Firms that use "off-balance-sheet" financing, such as leasing, would show lower debt ratios if the effects of their leases were reflected in their financial statements.
• B)Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure, in an amount sufficient to support the lease payment obligation.
• C)The fixed charges associated with a lease can be as high as, but never greater than, the fixed payments associated with a loan.
• D)Capital, or financial, leases generally provide for maintenance by the lessor.
• E)A key difference between a capital lease and an operating lease is that with a capital lease, the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds, whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment.

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Definitions:

Contingency

An event or condition that is possible but cannot be predicted with certainty, often requiring flexible planning and response strategies.

Mechanistic Organisational Design

A highly structured and formal organisational structure, characterized by clear hierarchies, rigid departmentalization, and strict procedural guidelines.

Organic Design

An approach to designing systems or structures in a way that is natural, adaptable, and capable of evolving over time.

Ethics

Sets standards as to what is good or bad, or right or wrong in a person’s conduct.