Tag: long term sources of finance

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Questions Related to long term sources of finance

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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

  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. $(a) - (iv), (b) - (i), (c) - (iii), (d) - (ii)$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Matching the definitions: (a) Finance lease involves transferring risks/rewards, (b) Operating lease involves maintenance by the lessor, (c) Sale and leaseback is a specific type, (d) Direct lease is the standard acquisition.

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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

  1. Higher

  2. Medium

  3. Lower

  4. Both a and b
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

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

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

  1. cost of owning the same

  2. cost of selling the same

  3. cost of renting the same

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

The risk of obsolescence is borne by the _________.

  1. Lessor

  2. Lessee

  3. Both a and b

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
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.