A Lease with High Payments Early in Its Life Which

question 12

Multiple Choice

A lease with high payments early in its life which then decline to termination would:

• A) provide greater cashflow to the lessee in the beginning years.
• B) be evidence of tax avoidance and not acceptable to the CCRA.
• C) be qualified as a capital lease under CICA3065.
• D) provide a lower residual value and thus ensure a bargain-purchase price option.

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Definitions:

Debt Worthy

A term indicating an individual or organization's capability and reliability in repaying borrowed money, often assessed by creditworthiness.

Expansion Capital

Refers to the funds provided to mature companies looking to expand operations, enter new markets, or acquire assets without changing control of the business.

Long-Term Borrowings

Loans or debt obligations with repayment schedules extending beyond one year, used to finance more permanent or significant investments.

Working Capital

The measure of a company's short-term financial health and operational efficiency, calculated as current assets minus current liabilities.