Purchase Solution

Characteristics of Leasing

Not what you're looking for?

Ask Custom Question

Discuss the validity of each of the following statements.

a. Leasing reduces risk and can reduce a firm's cost of capital

b. Leasing provides 100-percent financing.

c. Firms that do a large amount of leasing will not do much borrowing.

d. If the tax advantages of leasing were eliminated, leasing would disappear.

Purchase this Solution
Solution Summary

Solution discusses the characteristics and benefits of leasing versus buying.

Solution Preview

a. Leasing reduces risk and can reduce a firm's cost of capital :

Essentially, a lease is a rental agreement in which one party (the lessor) maintains ownership of an asset and another party (the lessee) uses it in its business activities. In today's world, most leases are. The first step is to decide what equipment you may want to own "forever" and what might be more practical to lease. If you do this objectively, you will probably find a relatively small pool of "must own" stuff. For example, many people are surprised to learn that the major US airlines lease most of their aircraft. The airlines have decided to save their cash and borrowing power for operating requirements. A leasing contract can be tailored to meet the needs of any business. Through leasing, a business can ...

Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Motivation

This tests some key elements of major motivation theories.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

View More Free Quizzes
Related BrainMass Solutions

  • Railcar Leasing: Lessors' direct financing lease

    The lease must be accounted for as a direct financing lease because Railcar Leasing Incorporated is not a manufacturer and because both of the Type II characteristics discussed in the chapter are met, and two of the Type I characteristics (only one is

  • Lease Financing Mini Case

    (2) What are the five primary types of leases, and what are their characteristics? (3) How are leases classified for tax purposes? (4) What effect does leasing have on a firm's balance sheet?

  • Leasing and Borrowing Analysis

    The distinguishing characteristics of financial leases are that (1) the duration of the lease generally coincides with the functional or economic life of the property, (2) the lease may not be canceled, and (3) the lessee is often responsible for maintaining

  • Incremental Cash Flow and Time Value of Money

    The distinguishing characteristics of financial leases are that (1) the duration of the lease generally coincides with the functional or economic life of the property, (2) the lease may not be canceled, and (3) the lessee is often responsible for maintaining

  • Debt and Equity

    "Different characteristics of debt and equity should be considered when finance decisions are made. What does this statement mean? " - This is not restricted to leasing.

  • Black-Scholes, Warrants, Leasing

    237267 Option Pricing using Black-Scholes, Warrants, Leasing, Understanding Option Quotes 1) Black-Scholes: What are the prices of a call option and a put option with the following characteristics?

  • Wide Area Network: ATM, CIR, CBR, VBR, UBR

    238916 Given the information flows over the WAN in your organization, determine the appropriate CIR for the leasing of a frame relay service. Given the leasing of an ATM service, allocate the flow among CBR, VBR and UBR services.

  • Key Advantages of Leasing an Asset

    387761 Key Advantages of Leasing an Asset What are the key advantages of leasing as compared to borrowing to acquire an asset? What are the key disadvantages of leasing?

  • Is leasing more expensive and more desirable than owning?

    Even though the customer saves the initial cost of the equipment by leasing instead of buying, the tax purposes of leasing can override the only benefit of leasing.

View More Related Solutions