Which of the following statements is incorrect?
A)A captive finance subsidiary's purpose is to finance sales of the parent company's products and services.
B)An operating agreement between the parent and the captive specifies the type of receivables that qualify for same and specific services provided by the parent.
C)A captive can be used to finance distributor or dealer inventories until a sale occurs.
D)A captive is rarely used to finance products leased to others.

Question

Quizplus · Accepted Answer

Captive finance subsidiaries are often used to finance products leased to others, so statement D is incorrect. Captives can finance a variety of products and services, including distributor or dealer inventories before a sale occurs, as stated in statement C. Statement A is also true, as it describes the primary purpose of a captive finance subsidiary, and statement B accurately describes the operating agreement between the parent and the captive.

Which of the Following Statements Is Incorrect