Chap 22

Question 1

Lessee

Answer 1

The user of an asset in a leasing agreement. The lessee makes payment to the lessor

Question 2

Lessor

Answer 2

The owner of an asset in a leasing agreement

Question 3

Operating lease

Answer 3

Usualy a short term lease wher the lessor is responsible for insurance, taxes and upkeeps. Often cancellable on shotr notice

Question 4

Financial lease

Answer 4

Long term lease where the lessee is responsible for upkeep. Usually not calcellable without penalty

Question 5

Tax oriented lease

Answer 5

Financial lease for which the lessor is the owner for tax purposes

Question 6

Sale and leaseback

Answer 6

A financial lease in which the lessee sells an asset to the lessor and then leases it back

Question 7

Leveraged Lease

Answer 7

A financial lease in which the lessor borrows a substential fraction of the cost of the asset

Question 8

Net Advantage to Leasing

Answer 8

NPV of the decision to lease an asset instead of buying it