ACCA Financial Management (F9) Certification Practice Exam

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Prepare for the ACCA Financial Management (F9) Certification Exam with engaging quizzes and interactive content. Dive deep into financial management concepts and boost your exam confidence with questions that come with detailed explanations.

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What does the term "sale and leaseback" refer to?

A method of financing through bank loans
A transaction where an asset is sold and then leased back
A strategy for increasing ownership of assets
A type of short-term financial leasing

The correct answer is: A transaction where an asset is sold and then leased back

The term "sale and leaseback" refers to a transaction where an asset is sold and then leased back by the seller. This process allows the seller to receive a lump sum of cash from the sale of the asset while retaining the ability to use that asset through leasing. This type of transaction is commonly utilized by companies to free up capital that is tied up in fixed assets. By selling the asset, a company can improve its cash flow and use the funds for other investments or operational needs. The leaseback arrangement enables the company to continue using the asset as if it still owned it, often leading to better liquidity without losing operational control over the asset. This approach can be beneficial for companies looking for flexibility in financing while also maintaining access to essential assets. It is a strategy that reflects a balance between securing immediate capital and managing asset utilization effectively.