When Deciding Whether to Buy a New Car or Repair

question 329

True/False

When deciding whether to buy a new car or repair an old car, it is as important to consider both how much has already been spent on the old car and the likely future costs of repairs to the old car.

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Definitions:

Asset Turnover Ratio

A financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue, calculated as total revenue divided by average total assets.

Operating Lease

An operating lease is a lease agreement that allows for the use of an asset but does not convey rights similar to ownership of the asset. Operating leases are treated as operating expenses in the income statement.

Lease Criteria

The conditions under which a leasing agreement is classified as either a finance lease or an operating lease in financial accounting.

Operating Leases

Lease agreements for the use of equipment or property where the lessor retains ownership, typically for a term shorter than the asset's life.