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.

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Definitions:

Safety Devices

Devices or mechanisms designed to prevent accidents or injuries, often found in vehicles, machinery, and at workplaces.

Low Risk

Situations or investments that have a minimal chance of loss or failure.

High Risk

refers to situations or activities with a high potential for loss or danger, often in the context of investments or decisions.

Insurance

A financial product that provides protection against possible future losses in exchange for a premium.