The principal reason for the existence of leasing is that:
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A. B. C. D.C
The principal reason for the existence of leasing is that companies, financial institutions, and individuals derive different benefits from owning, which can make it more advantageous to lease certain assets instead of purchasing them outright.
Leasing is a financial transaction in which one party (the lessor) provides an asset to another party (the lessee) for use over a specified period of time in exchange for regular lease payments. The lessee does not own the asset but is granted the right to use it during the lease term. At the end of the lease, the lessee typically has the option to purchase the asset, return it, or renew the lease.
Option A, Intermediate-term loans are difficult to obtain, is not the principal reason for the existence of leasing. While leasing can be a source of intermediate-term funds, it is not the only reason for its existence.
Option B, This is a type of financing unaffected by changes in tax law, is incorrect. Leasing can be affected by changes in tax law, and tax considerations are one of several factors that may be taken into account when deciding whether to lease or purchase an asset.
Option D, Leasing is a renewable source of intermediate-term funds, is also incorrect. While leasing can be a source of intermediate-term funds, it is not a renewable source of funds as the lessor must have access to assets that can be leased.
Therefore, the correct answer is C, companies, financial institutions, and individuals derive different benefits from owning, which can make it more advantageous to lease certain assets instead of purchasing them outright. Some of the benefits of leasing include lower upfront costs, tax benefits, and the ability to use newer equipment without the risk of obsolescence. Additionally, leasing can free up capital that can be used for other purposes, and it may be easier to obtain financing for a lease than for a purchase.