IAI Actuarial Core Principles · Business Finance · Structure and methods of financing a company
Which feature most clearly distinguishes a sale and leaseback from a conventional lease of a newly bought asset?
In a sale and leaseback the company already owns the asset, sells it to a lessor and leases it back. This releases capital tied up in the asset while the company keeps using it, paying rentals in return.
- AThe lessee never makes rental payments
- BThe lessee first owns the asset, sells it to the lessor, and then leases it back, releasing cash tied up in the assetCorrect
- CThe lessor is always a bank subsidiary
- DThe asset must be intangible
- The lessee obtains legal title at the end automatically
Explanation
In a sale and leaseback the firm already owns the asset, sells it for cash and leases it back, so it keeps using it while raising funds. The other options are not defining features.
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