An Operating Lease

question 21

Multiple Choice

An operating lease:

• A)Creates an asset and a liability on the balance sheet.
• B)Is a form of off-balance sheet financing.
• C)Is always preferable to a capital lease.
• D)Transfers title to the asset being leased.

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Definitions:

Compounded Monthly

The method of calculating interest where the interest earned is added to the principal at the end of each month, leading to interest on interest in subsequent months.

Conditional Sale Agreement

A contract in which the sale is contingent upon certain conditions, typically used in real estate and high-value purchases.

Cash Price

The amount of money required to purchase an item or service outright without financing.

Compounded Quarterly

Refers to the process of calculating interest on an investment or loan where the interest is added to the principal amount four times a year.