CBSE 2024, Set 3

Question

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given below:

Assertion (A): Availability of leasing facilities may reduce the funds required to be invested in fixed assets thereby reducing the fixed capital requirements.

Reason (R): When an asset is taken on lease, the firm pays lease rentals to use it and avoids to invest huge sums required to purchase it. A). Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). B). Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). C). Assertion (A) is true but Reason (R) is false. D). Assertion (A) is false but Reason (R) is true.

Edvaya · Accepted Answer

The correct answer is Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).. Both statements are correct. Taking assets on lease reduces the need to purchase them outright, avoiding a massive initial cash outflow, which is the exact reason why the overall fixed capital requirement decreases.

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Business Studies > Business Finance > Financial Management

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