Business Process Management: Financial Decisions

Question 1

Operating Lease

Answer 1

Because the lessee is paying rent payments it does not show on their balance sheet

Question 2

Capital Lease

Answer 2

Leases where leasee is getting helped by the lessor to buy the asset, The lessee would record this as an asset and an obligation on the balance sheet

Question 3

In order to classify a lease as a capital lease

Answer 3

-Ownership transfer at the end of the lease
-Written option for bargain purchase
-Ninety percent of lease property
75% or more of the assets economic life is committed in the lease term.

Question 4

Debentures And Bonds

Answer 4

Have a fixed Cost

• Has a maturity debt
• Because we are taking on more debt our credit is going down’
• No new owners so our EPS increases

Question 5

Mortgage Bonds

Answer 5

loan that is secured by residential or commercial real property.

Question 6

Equity Financing

Answer 6

• has a variable cost
• no maturity
• tends to improve credit worthiness
• because it has a lot of owners EPS decreases

Question 7

Equity Financing Types

Answer 7

Preferred Stock
-Offer fixed dividend payment to their holders.
-Timing of that dividend depends when the board wants to issue it.
Common Stock
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