Discuss CIPS L5M8 Exam Topic 2 Question 15

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?

Ahire purchase

Bfinance lease

Coperating lease

Dasset loan

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.

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17 comments · newest first

Stephaine 2 months ago

Finance lease is the right choice for sure!

Carla 2 months ago

Hire purchase seemed close, but the leasing aspect is crucial.

Twila 2 months ago

Exactly! Less upfront cost, more flexibility.

Blondell 2 months ago

Plus, it helps manage cash flow better.

Stephaine 2 months ago

Definitely finance lease. It allows ownership after leasing.

Carla 2 months ago

I was torn between finance lease and hire purchase. But the leasing part stands out.

Twila 3 months ago

Agreed! The balloon payment at the end is a key indicator.

Blondell 3 months ago

I think it's a finance lease. It fits the description well.

Ciara 3 months ago

I’m not so sure about that, seems a bit complicated!

Edelmira 3 months ago

Wait, can you really own it after just two years?

Allene 3 months ago

Definitely not an operating lease!

Xenia 4 months ago

I think it's a finance lease, right?

Emily 4 months ago

Sounds like a hire purchase to me!

Ettie 4 months ago

I feel like this is definitely not an asset loan since that usually involves borrowing money to buy the asset outright.

Monte 4 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?

Jerlene 4 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.

Catarina 4 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.

CIPS L5M8 Exam - Topic 2 Question 15 Discussion