Global cash flow assessment should include which parties?

• A. Guarantor and lessee
• B. Only the lessee
• C. Only the guarantor
• D. None

Answer: (A)

Global cash flow assessment looks at every source that can provide payment to the lessor over the life of the lease. The lessee is the primary payer, but if there’s a guarantor—such as a parent company or bank guaranteeing the lease—the guarantor’s obligation can be called upon to meet payments if the lessee can’t. Including both parties gives a complete picture of cash-flow certainty and credit risk, which is essential for evaluating the transaction’s viability and how it should be priced. Relying only on the lessee ignores potential backup payments; relying only on the guarantor ignores the actual payment stream and the conditions under which the guarantor would step in. Therefore, both are included.