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:

Herfindahl Index

A measure of market concentration that calculates the sum of the squares of the market shares of the firms within an industry, used to assess the competition level.

Market Shares

The percentage of an industry's sales that a particular company controls.

Conglomerate Merger

A type of merger where two or more companies in unrelated business areas combine operations.

Buyer-Seller Relationship

The interactions and exchanges between a buyer and a seller, including transactions, communication, and any long-term engagements.