Difficulty

Difficulty - c. A financial lease is a lease that does not...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
(Difficulty: E = Easy, M = Medium, and T = Tough) Multiple Choice: Conceptual Easy: Lease cash flows Answer: c Diff: E i . The riskiness of the cash flows to the lessee, with the possible exception of residual value, is about the same as the riskiness of the lessee’s a. Equity cash flows. b. Capital budgeting project cash flows. c. Debt cash flows. d. Pension fund cash flows. e. None of the statements above is correct. Operating lease Answer: e Diff: E ii . Operating leases usually have terms that include a. Maintenance of the equipment. b. Only partial amortization. c. Cancellation clauses. d. Statements a and c are correct. e. All of the statements above are correct. Leasing Answer: c Diff: E N iii . Which of the following statements concerning leasing is most correct? a. A sale and leaseback is a lease under which the lessor maintains and finances the property; also called a service lease. b. The lessor is the party that uses the leased property.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: c. A financial lease is a lease that does not provide for maintenance services, is not cancelable, and is fully amortized over its life; also called a capital lease. d. An important characteristic of operating leases is the fact that they are frequently fully amortized; in other words, the payments required under the lease contract are sufficient to recover the full cost of the equipment. e. None of the statements above. i . Lease cash flows Answer: c Diff: E ii . Operating lease Answer: e Diff: E iii . Leasing Answer: c Diff: E N Statement a is the definition of an operating lease. Statement b is the definition of the lessee. Statement d is incorrect; an important characteristic of an operating lease is that they are frequently not fully amortized. Therefore, the correct statement is c....
View Full Document

This note was uploaded on 08/04/2011 for the course COMM 101 taught by Professor Sy during the Spring '11 term at USC.

Page1 / 3

Difficulty - c. A financial lease is a lease that does not...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online