Which of the Following Statements Is False

question 28

Multiple Choice

Which of the following statements is false?

• A) The lease-equivalent loan is the loan that is required on the purchase of the asset that leaves the purchaser with the same obligations as the lessor would have.
• B) Lease obligations themselves could trigger financial distress.
• C) When a firm enters into a lease, it is committing to lease payments that are a fixed future obligation of the firm.
• D) When a firm leases an asset, it is effectively adding leverage to its capital structure (whether or not the lease appears on the balance sheet for accounting purposes).

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Definitions:

Inelastic

A description of a good's demand when consumers’ demand for it does not significantly change with a change in the good's price.

Total Revenue

The total income received by a firm from its sales of goods or services, calculated as the quantity sold times the price per unit.

Price Lowered

A decrease in the cost of a good or service to consumers.

Price Elasticity

A measure of the responsiveness of quantity demanded or supplied of a good to a change in its price.