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.
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.
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In assertion-reason questions about financial concepts, check if the reason explains the "how" behind the assertion's "what".
Updated On: Jan 13, 2026
- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
- Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
- Assertion (A) is true but Reason (R) is false.
- Assertion (A) is false but Reason (R) is true.
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Verified By Collegedunia
The Correct Option is A
Solution and Explanation
The relationship between leasing and fixed capital is correctly explained: Assertion Verification:
1. Leasing Impact: - Converts capex to opex - Example: Airlines leasing aircraft vs buying
2. Balance Sheet Effect: - No asset ownership → Lower fixed capital - Lease obligations as liabilities Reason Analysis:
1. Mechanism: - Periodic payments vs lump-sum purchase - Preserves working capital
2. Direct Explanation: - Clearly shows how leasing reduces fixed capital needs - Mathematically: ₹10 crore equipment lease = ₹1 crore/year vs ₹10 crore upfront
Final Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
1. Leasing Impact: - Converts capex to opex - Example: Airlines leasing aircraft vs buying
2. Balance Sheet Effect: - No asset ownership → Lower fixed capital - Lease obligations as liabilities Reason Analysis:
1. Mechanism: - Periodic payments vs lump-sum purchase - Preserves working capital
2. Direct Explanation: - Clearly shows how leasing reduces fixed capital needs - Mathematically: ₹10 crore equipment lease = ₹1 crore/year vs ₹10 crore upfront
Final Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
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