Which of the following motivations are dubious reasons for leasing?
I.Leasing avoids capital expenditure controls.
II.Leasing preserves capital.
III.Leasing can make the firm's balance sheet and income statement look better by increasing book income or decreasing book assets or both.
IV.Tax shields can be used.

Question

Quizplus · Accepted Answer

Reasons I, II, and III are all considered to be dubious reasons for leasing. Leasing should not be used solely to avoid capital expenditure controls or to artificially make the balance sheet or income statement look better. While tax shields can be a legitimate reason for leasing, it should not be the only reason for doing so. Preserving capital is a valid reason for leasing, but it should not be the primary motivation, as the long-term cost of leasing may outweigh the benefits of preserving capital in the short-term.

Which of the Following Motivations Are Dubious Reasons for Leasing