Question

The following are sensible reasons for leasing except _____________.

Group of answer choices

leasing preserves capital

short term leases are convenient

lease cancelation options are valuable

standardization leads to low administrative and transaction costs for the lessor

Answer 1

Answer: Leasing preserves capital is not a sensible reason.

Short term leases gives flexibility with respect to the agreements as compared to a full year contract. It is also true that the lease cancellation options are valuable. Standardization leads to low administrative and transaction costs for the lessor is true particularly in the case of standardization of a particular kind of assets. It is also true for small buyers because standardization of operations will give cost benefit to lessor.