Tag: commerce

Questions Related to commerce

Lessor gets fixed amount of lease rental every year and they cannot increase this even if the cost of asset goes up.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. True

  2. False

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Correct Option: A
Explanation:

Lessor gets fixed amount of lease rental every year and they cannot increase this even if the cost of asset goes up- this is a true statement.While making the leasing decision, the cost of leasing an asset must be compared with the cost of owning the same.

Lease rentals paid by the lessee are deductible for computing taxable profits.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

The lessee never becomes the owner of the asset. A person who holds an property is known as lessee.Lease rentals paid by the lessee are deductible for computing taxable profits- this is a true statement.

Match the statements in List-I with the types of lease in the List-II as follows:

List - I List - II
(a) Lessor transfers all risks and rewards of an asset to the lessee. (i) Indirect lease
(b) Lessor transfers the assets to the lessee but bears the cost of maintenance (ii) Operating lease
(c) The owner of the asset sells it to turn leases it back to the owner (now lesser) (iii) Finance lease
(d) Lessor owns/ acquires the assets that are leased to a given lesser. (iv) Direct lease
commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. $(a) - (ii), (b) - (iii), (c) - (iv), (d) - (i)$

  2. $(a) - (i), (b) - (iv), (c) - (ii), (d) - (iii)$

  3. $(a) - (iii), (b) - (ii), (c) - (i), (d) - (iv)$

  4. $(a) - (iv), (b) - (i), (c) - (iii), (d) - (ii)$

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Correct Option: C

The demand for leasing is steadily increasing as economic growth can be maintained even during the period of depression.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

The demand for leasing is steadily increasing as economic growth can be maintained even during the period of depression- this is a true statement. For using an asset, a contract has to be made between the leaser and the leasee, which is known as a lease.

The _____ never becomes the owner of the asset.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. lessee

  2. bank

  3. hypothicatee

  4. franchisee

Show answer
Correct Option: A
Explanation:

The lessee never becomes the owner of the asset. A person who holds an property is known as lessee.

Lease financing provides finance diluting the ownership or control of business.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Lease financing provides finance diluting the ownership or control of business.-this is a false statement as lease financing does not provide finance diluting the ownership of the business.Lease rentals paid by the lessee are deductible for computing taxable profits.

The normal business operations may be affected in case the lease is not renewed.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

The normal business operations may be affected in case the lease is not renewed- this is a true statement. For using an asset, a contract has to be made between the leaser and the leasee, which is known as a lease.

Lease financing enables the lessee to acquire the asset with a ________ investment.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. Higher

  2. Medium

  3. Lower

  4. Both a and b

Show answer
Correct Option: C
Explanation:

Lease financing in other words is renting of an asset for some specific period. The lessee pays a fixed periodic amount called lease rental to the lessor for the use of the asset. This enables the lessee to acquire  the assets with a lower investment.

While making the leasing decision, the cost of leasing an asset must be compared with the ________.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. cost of owning the same

  2. cost of selling the same

  3. cost of renting the same

  4. none of the above

Show answer
Correct Option: A
Explanation:

While making the leasing decision, the cost of leasing an asset must be compared with the cost of owning the same.Lease financing does not provide finance diluting the ownership of the business.Lease rentals paid by the lessee are deductible for computing taxable profits.

The risk of obsolescence is borne by the _________.

commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

  1. Lessor

  2. Lessee

  3. Both a and b

  4. None of the above

Show answer
Correct Option: A
Explanation:
A lease is a contractual agreement where by one party i.e., the owner of an asset grants the other party the right to use the asset in return for a periodic payment. 
The owner of the assets is called the‘lessor’ while the party that uses the assets is known as the ‘lessee’. The risk of obsolescence is borne by the lesser.