Quincy owns a metal fabricating company. He is desperately in need of working capital in order to carry out several large orders. Therefore he sells his heavy stamping equipment to Beneficial Leasing Inc. in a five- year purchase lease plan. This arrangement amounts to
A) an operating lease.
B) a sale and leaseback.
C) the mortgaging of assets.
D) the ducktail plan.
E) one of the highest costs in asset financing.

Question

Quizplus · Accepted Answer

This arrangement is a sale and leaseback, where Quincy sells his stamping equipment to Beneficial Leasing Inc. and then leases it back from them for a set period of time. This provides him with working capital while still allowing him to use the equipment to fulfill his orders.

Quincy Owns a Metal Fabricating Company