Economics · Financial Management and Lease Financing
Given below are an Assertion and Reasoning regarding lease financing: Assertion: In an operating lease, the lessor bears the entire risk of obsolescence of the leased equipment and must rely on the residual value of the asset or multiple lease cycles to recover the original investment and earn a profit. Reasoning: An operating lease is typically a short-term arrangement where the lease period is significantly less than the economic life of the asset, and the contract often includes a cancellation clause allowing the lessee to return the equipment if technological advancements render it inefficient. Select the correct option:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Assertion is false but Reasoning is true.
- 2Assertion is true but Reasoning is false.
- 3Both Assertion and Reasoning are true but Reasoning is not the correct explanation of Assertion.
- 4Both Assertion and Reasoning are true and Reasoning is the correct explanation of Assertion .✓
Correct answer
Both Assertion and Reasoning are true and Reasoning is the correct explanation of Assertion .
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