Which statement is correct?
A)Lessees prefer finance leases.
B)Lessees prefer operating leases.
C)Operating leases are more favourable to the lessor in the short term.
D)Finance leases are more favourable to the lessee in the short term.

Question

Quizplus · Accepted Answer

Lessees generally prefer operating leases as they offer more flexibility in terms of the duration of the lease and the option to return the asset at the end of the lease period. Operating leases are typically shorter term and do not transfer ownership of the asset to the lessee, which means that the lessor retains the risk and rewards associated with ownership. In the short term, this can be more favourable to the lessor as they are able to generate a higher return on investment. Finance leases, on the other hand, transfer ownership to the lessee and are typically longer term, which can be more favourable to the lessee in the long run.

Which Statement Is Correct