Final answer:
In lease agreements, both the lessee and lessor can have operating leases and sales-type leases. Capital (finance) leases and direct financing leases also involve both parties but are initiated differently. Understanding the distinction among these helps in determining the suitable lease type for each party's circumstances.
Step-by-step explanation:
When researching different types of leases that are available to the lessee (the party that receives the lease) and the lessor (the party that provides the lease), it's important to understand the four options:
- Operating leases are often used by the lessee and lessor for assets that are not fully amortized during the lease term and can be cancelled before the lease term is up.
- Capital (finance) leases or financial leases are typically used by lessees to effectively purchase and fully amortize an asset over the lease term.
- Direct financing leases are used by lessors when they purchase an asset and lease it out; it's essentially a way for a lessor to finance an asset for a lessee.
- Sales-type leases also involve the lessor, where the lessor effectively sells the leased asset to the lessee, while at the same time providing a loan for the same asset.
To answer the original question: A. Both could have operating leases, B. Only the Lessee can have a capital (financial) lease, C. Only the Lessee can have a direct financing lease, D. Both could have sales-type leases. The correct choice here is A, as both lessees and lessors can engage in operating leases. However, it's important to note that both lessees and lessors can also be involved in sales-type leases, where the key difference is the profit recognition at the lease’s commencement for a lessor. It would not be accurate to say that only the lessee can have a capital or direct financing lease as these involve both parties in different capacities.