An Argument Forwarded as Justification for Leasing Is That It

question 1

Multiple Choice

An argument forwarded as justification for leasing is that it allows a company to conserve its capital.Which of the following statements offers criticism of this argument?

• A)If lease rentals are payable in advance,the finance effectively provided by leasing can be much less than the purchase price of the asset.
• B)Security provided to the lessor is restricted to ownership of the asset.
• C)A lessee can borrow 100 per cent of the purchase price of an asset compared with perhaps 80 per cent in the case of a secured loan.
• D)Leasing has the potential to offer 'off balance sheet financing'.

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Definitions:

Cash Sales

Transactions where the purchase of goods or services is paid for with cash at the time of sale.

Sales Forecast

The process of estimating future sales, helping businesses make informed procurement, production, and marketing decisions.

Budgeted Cash

An estimation of cash inflows and outflows for a business over a specific period, used for financial planning purposes.

Collection Pattern

The typical manner or schedule with which a business collects payments from its customers.