Question

Leasing is a popular form of financing because: ________

a. the lease is slower to finalize then a bond.
b. the lessee may be financially able to purchase.
c. the lessor likely does not have experience with the equipment being leased.
d. lease provisions are generally less restrictive than a bond indenture.

Answer 1

Leasing is a popular form of financing primarily because lease provisions are generally less restrictive than the terms and conditions found in a bond indenture, granting firms more operational freedom.

Step-by-step explanation:

Leasing is a popular form of financing because lease provisions are generally less restrictive than a bond indenture. This flexibility can be attractive to firms as it allows them more freedom in their operations and financial decisions compared to the more stringent requirements that bonds typically entail. Additionally, leasing can be more accessible for firms, especially for acquiring expensive equipment, as it does not require the large up-front capital expenditure that purchasing would. In contrast, bond financing often comes with more rigid terms, requiring the firm to adhere to certain financial ratios and other covenants laid out in the bond indenture.