Which of the Following Statements Is False

question 20

Multiple Choice

Which of the following statements is false?

• A) Leasing allows the party best able to bear the risk to hold it. For example, small firms with a low tolerance for risk may prefer to lease rather than purchase assets.
• B) When the lessor is the manufacturer, a lease in which the lessor bears the risk of the residual value can improve incentives and lower agency costs.
• C) For leases in which the lessor retains a substantial interest in the asset's residual value, the lessee has more of an incentive to take proper care of an asset that is leased rather than purchased.
• D) Whether they appear on the balance sheet or not, lease commitments are a liability for the firm.