Ask Question, Ask an Expert


Ask Basic Finance Expert

problem1: Heavy use of off-balance sheet lease financing will tend to

[A] Affect a firm’s cash flows but not its degree of risk.

[B] Make a firm appear more risky than it actually is because its stated debt ratio will appear higher.

[C] Make a firm appear less risky than it actually is because its stated debt ratio will appear lower.

[D] Have no effect on either cash flows or risk because the cash flows are already reflected in the income statement.

problem2: Financial Accounting Standards Board (FASB) Statement #13 needs that for an unqualified audit report, financial [or capital] leases must be included in the balance sheet by reporting the

[A] Value of the leased asset as a fixed asset.

[B] Present value of future lease pay­ments as an asset.

[C] Present value of future lease pay­ments as a liability.

[D] Both A & B above.

[E] Both A & C above.

problem3:  Determine which of the following statements is most correct?

[A] The fixed charges associated with a lease can be as high as, but never greater than, the fixed payments associated with a loan.

[B] Capital, or financial, leases generally provide for maintenance service on the part of the lessor & can be refinanced at the discretion of the lessee.

[C] Firms which use “off balance sheet” financing, such as leasing, will show lower debt ratios once the effects of their leases are reflected in their financial statements.

[D] Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure, in an amount sufficient to support the lease payment obligation.

[E] A key difference between a capital lease & an operating lease is that with a capital lease, the total lease payments on the asset are roughly equal to the full price of the asset plus a return on the investment in the asset.

problem4: Operating leases normally have terms that include

[A] Cancellation clauses

[B] All of the above

[C] Maintenance of the equipment

[D] Only partial amortization

[E] Only answers A & C above

problem5: The lease analysis should compare the cost of leasing to the;

[A] After-tax cost of debt to measure the effect of leasing on the cost of equity

[B] Average cost of all fixed charges

[C] Cost of owning using debt

[D] Cost of owning using equity

[E] Cost of owning using the weighted average cost of capital for the firm

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M920012

Have any Question? 

Related Questions in Basic Finance

Beta ltd just paid a dividend of 040 and dividends are paid

Beta Ltd just paid a dividend of $0.40 and dividends are paid once a year. Dividends are expected to grow at 4% p.a. for each of the next five years and then to remain constant forever. Assume a required rate of return o ...

In todays rapidly changing and competitive business world

In today's rapidly changing and competitive business world, it is in important to stay current with financial news and events. Visit a financial-related website like,,, ...

Explain how a protective put is like purchasing insurance

Explain how a protective put is like purchasing insurance on a stock ? Why is choosing an exercise price on a protective put like deciding which deductible to take on an insurance policy? Discuss and compare the two bull ...

Gate gourmet case study success means getting to the plane

Gate Gourmet Case Study: Success Means Getting to the Plane on Time· Provide a comprehensive overview including background and analysis (two pages) of the case study. Then answer the following questions. The case study q ...

The hudson corporation makes an investment of 24000 that

The Hudson Corporation makes an investment of $24,000 that provides the following cash flow: Year Cash Flow 1................ $ 13,000 2................ 13,000 3................ 4,000 a. What is the net present value at ...

Ethical dilemma- rita is the office manager of a

Ethical Dilemma:- Rita is the office manager of a three-doctor practice. Her brother, Juan, a recent college graduate, recently started working for a large insurance company that specializes in health insurance. In attem ...

1 graphically explain cost-push and demand pull inflation2

1. Graphically explain Cost-push and Demand pull inflation. 2. What is meant by Effective Exchange rate? Explain with examples how Nominal and Real Effective exchange rate are measured in an economy. 3. Define Purchasing ...

Discussion 1 170 wordsidentify a futures commodity exchange

Discussion 1: (170 words) Identify a futures commodity, exchange, stock, or interest rate. Use the internet to find a short history of the performance of this futures contract. Then research the possible reasons for this ...

At a used car lot a nearly new car with only 2000 miles on

At a used car lot, a nearly new car with only 2,000 miles on the odometer is selling for half the car's original price. The salesperson tells you that the car was "driven by a little old lady from Pasadena" who had it fo ...

Company a has inventory equal to 100000 with a current

Company A has inventory equal to $100,000 with a current ratio of 2.3 and quick ratio of 1.8, what is the level of the firms current liabilities?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro