Financial Leases Are a Source of Financing in the Sense

question 75

Multiple Choice

Financial leases are a source of financing in the sense that:

• A)The lessor must find a source of financing to buy the asset
• B)The lessee must borrow money for his first lease payment
• C)The lessee avoids buying, but gets the use of the asset through financing
• D)The lessor can use the lease payments as collateral to borrow

---

Definitions:

Financing Activities

Activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Non-Current Liabilities

Liabilities not due for settlement within 12 months after the reporting period, often including long-term loans, bonds payable, and lease obligations.

Profit After Tax

The net income earned by a company after all taxes have been deducted from total revenue.