Which one of the following is most likely the primary reason why a lessee opts to lease an asset on a short-term basis rather than buy that asset?
A) To keep the asset off the balance sheet
B) To avoid taxes
C) To lower transaction costs
D) To increase collateral
E) To provide nonrecourse protection

Question

Quizplus · Accepted Answer

Leasing an asset on a short-term basis allows the lessee to avoid the long-term commitment of purchasing the asset, which can be advantageous if the lessee's need for the asset is only temporary. In addition, leasing can provide flexibility and lower transaction costs as compared to buying, since there are generally fewer upfront costs and less paperwork involved. While keeping the asset off the balance sheet can also be a benefit to leasing, it is not necessarily the primary reason why a lessee would choose a short-term lease over buying. Avoiding taxes, increasing collateral, and providing nonrecourse protection are generally not primary considerations in the decision to lease an asset on a short-term basis.

Which One of the Following Is Most Likely the Primary