1. What are some of the various lease options? When would you use one option over the others? What could be the financial impact of this decision?
2. What are the components of the capital structure? What are the differences of these components?© BrainMass Inc. brainmass.com October 16, 2018, 10:00 pm ad1c9bdddf
The response addresses the queries posted in 809 words with references.
//Before writing about the Components of Capital Structure, it is essential to have knowledge about the 'Types of Lease'. One should know about the conditions in which, a person can use one lease option over other lease option.//
Types of Lease
A lease is a contractual agreement in which, two parties are involved. In a lease agreement, a party owner of the assets provides them for use to another person, who is known as the user or lessee. It is a tool to finance the cost of assets. Lease option can be classified in to the following types -
I. Finance lease - In a finance lease, all risks and rewards are transferred to the lessee. It includes rental payment over an obligatory non-cancelable lease period. The lessee is responsible for all the taxes and the maintenance & insurance of the assets. The provider of assets works as a financier for the lessee.
II. Operating lease - In this type of lease, the lessor doesn't transfer all the risks and rewards to the lessee. The lessor is responsible for maintaining, repairing and providing technical advices for the assets in a lease agreement. The lease period is generally shorter than the economic life of the assets.
III. Capital lease - In a capital lease, the ownership is transferred from the lessor to the lessee at the end of the lease term. The lease term is estimated to be 75% of the economic life of the assets. In this lease, the total ...
The response addresses the queries posted in 809 Words, APA Reference.
Debt ratings, types of leases, components of capital, credit analysis
1. Explain why selecting a target senior debt rating is a reasonable approach to choosing a capital structure. Explain why a target senior debt rating of single- A is a prudent objective when there is only a very limited new issue market for non-investment-grade debt, and when investor willingness to purchase triple-B-rated debt is likely to be highly sensitive to the state of the economy.
2. What is a lease? Compare and contrast an operating lease and a capital lease. What is a leveraged lease? What are the main advantages of leasing when compared with conventional debt financing?
3. A company's capital structure consists solely of debt and common stock equity. What actions should be taken if the company believes it is:
4. What are the three steps in a comparative credit analysis? How can a firm select an appropriate rating objective?
5. What is subordinated debt? What is a debenture? What is convertible debt? What are loan covenants? Why do firms usually issue convertible bonds in that form rather than as senior debt?View Full Posting Details