______ is used to finance "rolling stock"

Expert Solution

Correct answer will be: Equipment trust certificates

Before answering this question, we need to understand what rolling stocks are.

Rolling stocks refer to those assets which we acquire today but pay for over a period of time. At times some of these assets are very expensive and hence company may not be able to pay the entire consideration at the time of purchase. The company therefore promises to pay stipulated payments over a period of time. However, the company takes possession of such assets and start using the same. Common examples are: airplanes, railway wagons, construction equipment etc.

Equipment trust certificates are issued to finance the purchase of rolling stocks. It's debt instrument where the title or ownership of the equipment lies with a trust or trustee appointed on behalf of the debt holders. The equipment financed is the security behind the equipment trust certificates. Once the entire consideration is paid, the certificates are redeemed and the title of the equipment then passes to the company.

jeff jeffy answered 1 year ago

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