Which of the following statements is FALSE?
A)Leasing allows the party best able to bear the risk to hold it.For example,small firms with a low tolerance for risk may prefer to lease rather than purchase assets.
B)When the lessor is the manufacturer,a lease in which the lessor bears the risk of the residual value can improve incentives and lower agency costs.
C)For leases in which the lessor retains a substantial interest in the asset's residual value,the lessee has more of an incentive to take proper care of an asset that is leased rather than purchased.
D)Whether they appear on the balance sheet or not,lease commitments are a liability for the firm.

Question

Quizplus · Accepted Answer

When the lessor retains a substantial interest in the asset's residual value, the lessee has less incentive to take proper care of the asset, as they do not bear the risk of the residual value.

Which of the Following Statements Is FALSE