Which statement best describes a finance lease from the lessee's perspective?
Correct answer: A. It transfers most ownership risks and rewards
- A. It transfers most ownership risks and rewards
- B. It requires payment only after the asset is sold
- C. It provides funds only for seasonal inventory
- D. It allows cancellation without significant penalty
Explanation
A finance lease substantially transfers the risks and rewards associated with ownership to the lessee, even though legal title may remain with the lessor. The other choices describe payment or cancellation arrangements, not the defining feature of a finance lease.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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