finance

1. Name : Zaiena Naeem
Roll No : F20-BBA-5075
Corporate Finance
Submitted to : Dr Aisha Raiz
BBA 7th Semester
Section A (Evening)
University of Okara
13th December, 2023

2. 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)

3. 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.

4. 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.
Elements/components/Constituents of Leasing

5. 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

6. 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.

7. 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.

8. 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.

9. 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.

10. Which are the main type of leasing providing by commercial
bank and intermediary in Pakistan
1. Operating Lease
2. Financial Lease
3. Sale & Leaseback
4. Leveraged Lease