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    Leasing

    Uploaded by

    Zaiena Naeem
    for business students

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Leasing

    Uploaded by

    Zaiena Naeem
    33 views8 pages
    for business students

    Original Title

    leasing PPT file

    Copyright

    © © All Rights Reserved

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    PPTX, PDF, TXT or read online from Scribd

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    for business students

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    33 views8 pages

    Leasing

    Uploaded by

    Zaiena Naeem
    for business students

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 8

    Leasing as a sourse of Finance

    Leasing is an arrangement in which


    • the right to use the asset
    • is transferred to another person
    • by the asset owner
    • without transferring the asset's ownership.
    A lease is a contract under which one party, the lessor (owner of the
    asset), gives another party (the lessee) the exclusive right to use the
    asset, usually for a specified time in return for the payment of rent
    (Lease Rent)
    Elements/components/Constituents of Leasing
    Parties to a Lease
    • Lessor: The owner of the equipment permitting the use of the same
    by the other party on payment of a periodical amount.
    • Lessee: Who acquires the right to use equipment for which he pays
    periodically.

    Leased Asset
    • The asset may be anything - an automobile, land, factory.
    • Only tangible assets can be leased, you cannot lease intangible
    assets.
    Elements/components/Constituents of Leasing
    Lease Period
    • The term of lease, or lease period, is the for which the for agreement
    of the lease shall be in operation.
    • Asset should not be given permanently to the lessee.

    Lease Rental
    • This refers to the consideration received by the lessor in respect of a
    transaction.
    Advantage of Leasing

    From the viewpoint of the lessee


    • Saving of Capital
    • Flexibility and Convenience
    • Improvement in Liquidity
    • Shifting of risk of Obsolescence
    From the viewpoint of the lessor
    • Higher profits
    • Quick Returns
    Disadvantage of Leasing

    • Periodic payments are to be made, and funds need to be made


    available for the same.
    • The benefits of Capital appreciation are not available to the
    lessee.
    • The present value future obligations will be considered as a
    debt of the company.
    Types of Leasing

    (Based on Nature)
    Operating Lease:
    • This agreement can be canceled before the expiry of the lease period
    by providing prior notice.
    • The duration is less than the useful life asset.
    • The lessor cannot recover the full cost of the asset during the lease
    period.
    • In such an arrangement, the lessor is also liable to bear the
    maintenance costs.
    Types of Leasing

    Financial Lease:
    • Arrangement that is not eligible for cancellation, and rentals
    must be paid until the end of the lease duration.
    • The duration is generally equal to the useful life of the asset
    • as a sale of the asset, the lessee shall show such a leased asset in
    his balance sheet.
    • and the present value future rentals shall be shown as a liability .
    Types of Leasing
    (Based on Method of Lease)
    Direct Lease:
    • a firm acquires the right to use an asset from the manufacturer directly.
    • The ownership of the asset leased out remains with the manufacture
    itself.
    Sale & Leaseback:
    • the firm sells an asset that it owns and then leases to the same asset back
    from the buyer.
    Leveraged Lease:
    • Leveraged lease is the same as the direct lease, except that a third party,
    the lender, is involved in addition to the lessee & lessor.
    • The lender partly finances the purchase of the asset to be leased; the
    lessor turns to be a borrower.

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