Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

CIPS L5M8 Exam - Topic 2 Question 15 Discussion

Graham manages a biscuit-making factory and requires a new piece of equipment. After having his budget approved as a capital-expenditure item, he has looked at different purchasing options. Graham has decided to use a method in which the asset is leased over two years and at the end of the two years the company has the opportunity to own the asset outright via payment of a balloon payment. What type of purchase is this?
A) hire purchase
B) finance lease
C) operating lease
D) asset loan

CIPS L5M8 Exam - Topic 2 Question 15 Discussion

Actual exam question for CIPS's L5M8 exam
Question #: 15
Topic #: 2
[All L5M8 Questions]

Graham manages a biscuit-making factory and requires a new piece of equipment. After having his budget approved as a capital-expenditure item, he has looked at different purchasing options. Graham has decided to use a method in which the asset is leased over two years and at the end of the two years the company has the opportunity to own the asset outright via payment of a balloon payment. What type of purchase is this?

Show Suggested Answer Hide Answer
Suggested Answer: A

Hire purchase involves staged payments with an option to own the asset at the end (often via a final/balloon payment). Finance/operating leases don't necessarily transfer ownership.


by France at May 31, 2026, 06:38 PM

Limited Time Offer

25%

Off

Get Premium L5M8 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Blondell
4 days ago
Plus, it helps manage cash flow better.
upvoted 0 times
...
Stephaine
9 days ago
Definitely finance lease. It allows ownership after leasing.
upvoted 0 times
...
Carla
14 days ago
I was torn between finance lease and hire purchase. But the leasing part stands out.
upvoted 0 times
...
Twila
19 days ago
Agreed! The balloon payment at the end is a key indicator.
upvoted 0 times
...
Blondell
25 days ago
I think it's a finance lease. It fits the description well.
upvoted 0 times
...
Ciara
30 days ago
I’m not so sure about that, seems a bit complicated!
upvoted 0 times
...
Edelmira
1 month ago
Wait, can you really own it after just two years?
upvoted 0 times
...
Allene
1 month ago
Definitely not an operating lease!
upvoted 0 times
...
Xenia
2 months ago
I think it's a finance lease, right?
upvoted 0 times
...
Emily
2 months ago
Sounds like a hire purchase to me!
upvoted 0 times
...
Ettie
2 months ago
I feel like this is definitely not an asset loan since that usually involves borrowing money to buy the asset outright.
upvoted 0 times
...
Monte
2 months ago
I’m a bit confused because I thought an operating lease didn’t allow for ownership at the end, so it can't be that one, right?
upvoted 0 times
...
Jerlene
2 months ago
I remember practicing a question similar to this, and I think it might actually be a finance lease since there's a balloon payment involved at the end.
upvoted 0 times
...
Catarina
2 months ago
I think this sounds like a hire purchase because Graham can own the asset after the lease term, but I'm not completely sure.
upvoted 0 times
...

Save Cancel