Dear Readers, Here we have given Practice English Reading Comprehension quiz and questions for SBI Clerk and IDBI Executive 2018 Exams with detailed explanation. Candidates those who are preparing for Upcoming Bank Exams can make use of it.
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Directions (Q1-10): Read the following passage carefully and answer the questions given below it.
A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment is also leased.
Broadly put, a lease agreement is a contract between two parties, the lessor and the lessee. The lessor is the legal owner of the asset and the lessee obtains the right to use the asset in return for regular rental payments. The lessee also agrees to abide by various conditions regarding their use of the property or equipment. Both the lessee and the lessor face consequences if they fail to uphold the terms of the contract.
A lease is a very important financing option for an entrepreneur with no or inadequate money for financing the initial investment required in plant and machinery.
Lease are classified into different types based on the variation in the elements of a lease. A Certain variation in the elements of lease classifies lease into different types. These elements are the degree of ownership, risk and rewards transferred to the lessee, number of parties involved, location of lessor, lessee and the equipment supplier
Here, risk means the chance of technological obsolescence and reward refers to the cash flow generated from the use of equipment and the residual value of the equipment.
Very popularly heard leases are financial and operating lease. Apart from these, there are sale and lease back and direct lease, single investor lease and leveraged lease, and domestic and international lease.
Finance lease, also known as Full Payout Lease, is a type of lease wherein the lessor transfers substantially all the risks and rewards related to the asset to the lessee. Generally, the ownership is transferred to the lessee at the end of the economic life of the asset. Lease term is spread over the major part of the asset life. Here, a lessor is only a financier.
On the contrary, in operating lease, risk and rewards are not transferred completely to the lessee. The term of a lease is very small compared to the finance lease. The lessor depends on many different lessees for recovering his cost. Ownership along with its risks and rewards lies with the lessor. Here, a lessor is not only acting as a financier but he also provides additional services required in the course of using the asset or equipment.
Under sales and leaseback arrangement, a firm sells an asset to another party who in turn leases it back to the firm. The asset is usually sold at the market value on the day. It is exercised by the firm when it wants to free its money, invested in the equipment or asset to utilize it at the whatsoever place for any reason.
In single investor lease, there are two parties – lessor and lessee. The lessor arranges the money to finance the asset or equipment. The lender is entitled to recover money from the lessor only and not from the lessee in case of default by a lessor. Lessee is entitled to pay the lease rentals only to the lessor.
Leveraged lease, on the other hand, has three parties – lessor, lessee and the financier or lender. funds are arranged by the lessor and funds are financed by the lender or financier. Here, there is a direct connection of the lender with the lessee and in a case of default by the lessor; the lender is also entitled to receive money from the lessee.
On the other hand when, all the parties to the lease agreement reside in the same country, it is called domestic lease.
The International lease is of two types – Import Lease and Cross Border Lease. When lessor and lessee reside in the same country and equipment supplier stays in the different country, the lease arrangement is called import lease. When the lessor and lessee are residing in two different countries and no matter where the equipment supplier stays, the lease is called cross-border lease.
With the turmoil in the financial markets over the past few years, business owners are looking for ways to save money and improve cash flow. One area they should consider is equipment leasing, rather than buying outright.
Leasing arrangements can help businesses keep up with ever-changing technology. Even after only one year in use, much technology (such as computers) may need to be replaced by a newer, improved version. A leasing arrangement helps many businesses with the cost of continually buying new pieces of equipment to accommodate changes in business needs.A major economic advantage of leasing, depending on the lease structure, is that the monthly payments may be treated as a tax deductible business expense.
Companies that rely upon cutting-edge technology such as communication devices, vehicles, or other equipment will find a big economic advantage to leasing. A series of short-term leases will often cost you less than replacing the equipment every year or two. Asset flexibility is another leasing advantage. Based on the relationship between the lessor and the lessee, the lease may be for either just a few months or the entire expected life of the asset.
1) According to the passage, when lessor and lessee reside in two different countries, which type of lease arrangement, is this?
a) domestic lease
b) operating lease
c) single investor lease
d) cross border lease
e) finance lease
2) According to the passage, for which type of organization, lease is significant financing alternative?
a) small scale industries
b) financially sound organisation
c) multinational organisation
d) financially weak organisation
e) public sector undertakings
3) According to the passage, while determining the category of lease, which of the following elements will not be considered?
a) location of lessor
b) number of parties involved
c) risk transferred to lessee
d) government regulations
e) degree of ownership
4) According to the passage, which of the following will not be counted as the advantage of leasing arrangement?
a) asset flexibility
b) keep up with technology
c) helps in cost cutting
d) free transportation of goods
e) tax benefits
5) According to the passage, in sales and leaseback arrangement, why does a firm sells an asset to another party?
a) for getting a discount
b) for purchasing new asset
c) due to change in production technique
d) to free its money invested in asset
e) due to shift in location of firm
6) According to the passage, in which of the following types of lease, lessor provides additional services required in the course of using the asset?
a) international lease
b) operating lease
c) single investor lease
d) domestic lease
e) finance lease
7) Choose the word which as same meaning as the word “turmoil”
8) Choose the word which as same meaning as the word “substantially”
9) Choose the word which as opposite meaning as the word “uphold”
10) Choose the word which as opposite meaning as the word “entitled”
a) at liberty
1) Answer: d)
It is mentioned in the passage, that when lessor and lessee are residing in two different countries and no matter where the equipment supplier stays, the lease is called cross-border lease.
2) Answer: d)
It is clearly mentioned in the passage that the lease is important financing option for an organization which has inadequate funds for financing the initial investments.
3) Answer: d)
According to the passage ‘government regulation’ will not be considered as it is not mentioned in the passage.
4) Answer: d)
According to the passage, free transportation will not be counted as the advantage of leasing arrangement as it is not mentioned in the passage.
5) Answer: d)
It is mentioned in the passage that under sales and leaseback system a firm sells an asset to another party as it wants to free its money invested in asset or equipment.
6) Answer: b)
It is clearly mentioned in the passage, that in operating lease, a lessor is not only acting as a financier but he also provides additional services required in the course of using the asset.
7) Answer: d)
The meaning of “turmoil” is “upheaval / chaos/ mess”
8) Answer: c)
The meaning of “substantially” is “largely / considerably / significantly”.
9) Answer: d)
The meaning of “uphold” is “maintain” and its opposite is “deny / oppose / protest”.
10) Answer: d)
The meaning of “entitled” is “allowed/ permitted” and its opposite is “constrained / controlled”.
Daily Practice Test Schedule | Good Luck
|Topic||Daily Publishing Time|
|Daily News Papers & Editorials||8.00 AM|
|Current Affairs Quiz||9.00 AM|
|Logical Reasoning||10.00 AM|
|Quantitative Aptitude “20-20”||11.00 AM|
|Vocabulary (Based on The Hindu)||12.00 PM|
|Static GK Quiz||1.00 PM|
|English Language “20-20”||2.00 PM|
|Banking Awareness Quiz||3.00 PM|
|Reasoning Puzzles & Seating||4.00 PM|
|Daily Current Affairs Updates||5.00 PM|
|Data Interpretation / Application Sums (Topic Wise)||6.00 PM|
|Reasoning Ability “20-20”||7.00 PM|
|English Language (New Pattern Questions)||8.00 PM|
|General / Financial Awareness Quiz||9.00 PM|