EQUIPMENT LEASE, LEASE FINANCING
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is a lease in the context of equipment financing?
A lease is a contractual arrangement where the owner (lessor) grants the right to use an asset to another party (lessee) for a specified period in exchange for periodic rental payments.
What is a 'closed-end lease' in equipment financing?
Lessee returns asset at end; no purchase option exists.
What is the key difference between a finance lease and an operating lease?
A finance lease transfers substantially all risks and rewards of ownership to the lessee, while an operating lease does not transfer ownership risks and is more akin to a rental arrangement.
What is an 'open-end lease' and what risk does the lessee bear?
Lessee bears residual value risk at lease end.
Who is called the lessor in a lease transaction?
The lessor is the owner of the equipment who grants the right to use the asset to the lessee in exchange for periodic lease rentals.
What is meant by 'primary period' in a lease agreement?
Initial non-cancellable period during which full cost is recovered.
What is a full payout lease?
A full payout lease is a finance lease in which the lessor recovers the full cost of the asset plus a return on investment through the lease rentals paid over the lease term.
What is a 'secondary period' in lease financing?
Period after primary term when lessee pays nominal or peppercorn rent.
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