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The Financial Effect of Leasing and Buying

How is the rate of return for assets and equity, respectively, effected by the decision to lease or buy? If the lease is capitalized, wouldn't the results be the same as if I bought the item?

Solution Preview

A lease is an agreement conveying the right to use property, plant, or equipment usually for a stated period of time. The owner of the property is referred to as the lessor, and the renter is the lessee.

Effect on rate of return for assets and equity, respectively, effected by the decision to lease or buy.

If some body has taken the assets on operating lease than, in it operating lease, the lessor (or owner) transfers only the right to use the property to the lessee. At the end of the lease period, the lessee returns the property to the lessor. Since the lessee does not assume the risk of ownership, the lease expense is treated as an ...

Solution Summary

This compares the leasing and buying by their impact on return on equity and other issues.

$2.19