The following 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. avoiding the alternative minimum tax

Question

Quizplus · Accepted Answer

I. Leasing avoids capital expenditure controls: this is a dubious reason because the company still has to factor in leasing expenses into their budget and may face restrictions on how much they can spend on leasing.
II. Leasing preserves capital: while this may be true, leasing can also be more expensive in the long run compared to buying outright.
III. Leasing can make the firm's balance sheet and income statement look better by increasing book income or decreasing book assets or both: this is a dubious reason because it is misleading and does not reflect the true financial situation of the company.
IV. Avoiding the alternative minimum tax: this is a dubious reason because the tax benefits of leasing vary depending on the specific terms and conditions of the lease.

The Following Are Dubious Reasons for Leasing