Question

State the meaning of ‘sale and lease back’ system

Answer 1

The sale and lease back means a system in which a business sells its property to lease that property back.

Explanation:

The meaning of sale and lease back system is stated below:

It is a type of financial transaction under which a business sells its estate or property to another company and after that, leases that property back for long time period.  

The company that buys the fixed asset or property is said to be lessor while the company that sells it, is known as the lessee.  

The companies use this system in order to release cash from the existing assets, like equipment, land, machinery and building. The cash that a company gains through this system can be utilized for various purposes such as engaging of extra working capital in the business activities.