In Determining If the Risk and Rewards of Ownership Have

question 65

Multiple Choice

In determining if the risk and rewards of ownership have been transferred,AASB 117 states the following would indicate a finance lease is in effect:

• A) Ownership of the assets transfers at the end of the lease term for a variable payment equal to its then fair value.
• B) Contingent rents exist.
• C) The lease is non-cancellable by the lessor.
• D) The lease term is for a major part of the economic life of the asset.
• E) All of the given answers.

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Definitions:

Contribution Margin Ratio

A financial metric that measures how much of a company's revenue is left over after variable costs are subtracted, expressed as a percentage of sales revenue.

Variable Expense Ratio

A ratio computed by dividing variable expenses by sales.

Operating Leverage

A financial concept that measures the proportion of fixed costs in a company's cost structure, indicating its sensitivity to changes in sales volume.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.