When one party grants the right to use the asset to the other party in return for a periodic payment. It is known as:

Question

Accepted Answer

The correct option is 1:
The description perfectly defines **Lease financing**, which is a popular method of acquiring the use of a fixed asset without purchasing it outright. In this contractual arrangement, the party that owns the asset, known as the lessor, grants the other party, the lessee, the exclusive right to use that asset for a specified period. The consideration for this right is a series of regular payments, referred to as lease rentals or periodic payments. This is essentially a long-term rental agreement that allows businesses to conserve capital, bypass obsolescence risk, and gain operational control over equipment, machinery, or property, while the ownership title technically remains with the lessor.

The incorrect option is 2:
**Factoring** is a financial transaction that involves the sale of a business's accounts receivable (invoices) to a third party, known as a factor, at a discount. The primary purpose of factoring is to accelerate cash flow and transfer the burden of credit risk and collections management. It is a way for a company to convert its short-term assets (receivables) into immediate cash, which is fundamentally different from a contract for the right to use a fixed, non-monetary asset in exchange for rental payments.

The incorrect option is 3:
**Public deposits** are a method of corporate finance where a company invites the general public to deposit their savings with the company for a fixed tenure, in return for a predetermined rate of interest. This constitutes a direct form of borrowing from the public and creates a debt liability for the company. Unlike leasing, this transaction involves the company receiving money and promising to repay it with interest, and it has no connection to the arrangement of granting the right to use a specific asset.

The incorrect option is 4:
**Debts** is a general term for any financial obligation that requires one party to pay money or other agreed-upon consideration to another party, typically including the repayment of principal and interest. While lease financing can be seen as a form of debt, the core definition provided in the question—the grant of *right to use an asset* for a *periodic payment*—is too specific for the generic term 'Debts'. A simple loan or debt involves the exchange of money, not the transfer of asset usage rights.