What Is the Rationale for Analysing a Finance Lease by Comparing

question 43

Multiple Choice

What is the rationale for analysing a finance lease by comparing it with debt?

• A)An operating lease will use some of the lessee'slessee's debt capacity.
• B)A finance lease will use some of the lessee'slessee's debt capacity.
• C)A finance lease will use some of the lessor'slessor's debt capacity.
• D)The lessor is able to extend its debt capacity.

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Definitions:

European Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a certain asset at a specified price (strike price) on a specified date.

Strike Price

The specified price at which the holder of a financial option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

European Put Option

A contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price on or before a specified date.

Reorder Point

The inventory level at which a new order should be placed to replenish stock before it runs out, considering lead time.