Which of the Following Statements Is FALSE

question 18

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:

Laws

The system of rules created and enforced through social or governmental institutions to regulate behavior.

Common Law

A body of legal principles that derives from court decisions over time rather than from statutes or constitutions, emphasizing precedent in judicial decisions.

Creditor

An individual or institution that lends money or extends credit to another party, known as the debtor.

Shareholder Rights

The entitlements and protections granted to individuals or entities that own shares in a corporation, including voting on corporate matters.