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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
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.
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
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.
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

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corporate finance ppt file for finance students

  • 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