What does "yield" indicate in leasing terms?

What does "yield" indicate in leasing terms?

• A. The total cost incurred by the lessee.
• B. The rate of return on the leased asset investment.
• C. The period required to pay off the lease.
• D. The depreciation rate of the asset.

Answer: (B)

In leasing terms, "yield" primarily refers to the rate of return on the leased asset investment. This concept is fundamental in the context of leasing, as it reflects the financial performance and profitability expected by the lessor from the lease agreement. The yield takes into account the income generated from the lease payments in relation to the initial investment in the asset. Understanding yield is crucial for both lessors and lessees because it helps evaluate the attractiveness of a leasing arrangement. A higher yield indicates a more favorable return on investment for the lessor, which may influence their leasing decisions, pricing, and structuring of the lease agreement. By knowing the yield, parties involved in the lease can make informed financial decisions regarding the leasing of assets. The other options focus on different aspects of leasing but do not capture the essence of what yield signifies in this context. Total costs incurred by the lessee, the pay-off period, and the depreciation rate address distinct areas of financial understanding, but they do not specifically relate to the rate of return—as yield does.

In leasing terms, "yield" primarily refers to the rate of return on the leased asset investment. This concept is fundamental in the context of leasing, as it reflects the financial performance and profitability expected by the lessor from the lease agreement. The yield takes into account the income generated from the lease payments in relation to the initial investment in the asset.

Understanding yield is crucial for both lessors and lessees because it helps evaluate the attractiveness of a leasing arrangement. A higher yield indicates a more favorable return on investment for the lessor, which may influence their leasing decisions, pricing, and structuring of the lease agreement. By knowing the yield, parties involved in the lease can make informed financial decisions regarding the leasing of assets.

The other options focus on different aspects of leasing but do not capture the essence of what yield signifies in this context. Total costs incurred by the lessee, the pay-off period, and the depreciation rate address distinct areas of financial understanding, but they do not specifically relate to the rate of return—as yield does.