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When is a capital lease a better alternative than an operating lease?
Wiki User
∙ 17y ago
It depends on your business needs. A capital lease allows you to carry an item on your books as if you own it, so any of the reasons for ownership would qualify. One good reason for opting for a capital lease is that at the end of the term, you may purchase the item for little more than what you've already invested. This is good, if the equipment is well-maintained and could last well beyond its useful life. I have to qualify the answer, though, because I am not sure if you are talking FAS13 definition of capital lease for financial reporting purposes or what some people call capital lease under the Internal Revenue Code (also known as conditional sale).
Wiki User
∙ 17y ago
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In what circumstances is a capital lease a better alternative to an operating lease and under what circumstances is a clapital lease a better alternative than buying an asset?
1) When you do not need a current tax deduction, a capital works better, you can take depreciation over the term of the lease. 2) You buy a appreciating asset and lease a depreciating asset, A capital lease is better with a depreciating asset. http://www.equipmentleasing101.com
How are operating leases different from capital leases?
Operating lease does not give the ownership of the asset to lessee while finance lease gives the ownership of the asset as well at the end of leasing period.
What are different types of lease agreement?
1 - Operating Lease 2- Financial Lease
When is a capital lease a better alternative than buying an asset?
When the asset depreciates (loses value) fast and you want it only for a short period of time it may be better to lease than to buy. Leasing may also be a less expensive or more available method of financing than borrowing, particularly for someone with poor credit or little credit history, if you cannot afford to pay cash.
A lease of an asset for its entire productive life?
Lease which is done for the entire productive life of an asset is called "Capital lease or finance lease".
In what circumstances is a capital lease a better alternative to an operating lease and under what circumstances is a clapital lease a better alternative than buying an asset?
1) When you do not need a current tax deduction, a capital works better, you can take depreciation over the term of the lease. 2) You buy a appreciating asset and lease a depreciating asset, A capital lease is better with a depreciating asset. http://www.equipmentleasing101.com
Capital lease and financing lease are the same thing?
Finance lease and operating lease are different things.
How can an accountant determine whether a lease is a capital lease or operating lease?
If a copy of the lease agreement is made available to the accountant, this should be easily determined.
How are operating leases different from capital leases?
Operating lease does not give the ownership of the asset to lessee while finance lease gives the ownership of the asset as well at the end of leasing period.
Are cost of capital and marginal tax rate included on a cash flow statemnt?
Capital lease payments will affect cash flow from both operating activities and financing activities. A capital lease payment is treated as debt service. The portion of the payment applied to principal is a cash outflow from financing activities, and the portion applied to interest is a cash outflow from operating activities.
What are the 3 types of lease?
Leveraged Lease Financial Lease Operating Lease
What is meant by operating lease?
Operating Lease is a lease other than finance lease. A leasing transaction wherein the lessor takes the asset risk and the credit risk.
Definition of operating lease?
Operating Lease is a lease other than finance lease. A leasing transaction wherein the lessor takes the asset risk and the credit risk.
Difference between operating lease and finance leasing?
An operating lease does not transfer the risks and rewards to you (lessee) at the end of the lease period where a finance lease does. So in affect the operating lease can be thought of as renting the asset while a finance lease can be seen as a finance option to own the asset.
What are different types of lease agreement?
1 - Operating Lease 2- Financial Lease
What is lease obligation?
it is lease paid on capital invested
What is capitalized lease obligations?
it is lease paid on capital invested
